Childcare Voucher Scheme Changes

By 23rd February 2018 Blog No Comments

Drummond Laurie Chartered AccountantsIf you pay for childcare, using childcare vouchers can save many parents £1,000s a year.  These vouchers are available via a Government scheme, operated through employers and allow you to pay for childcare from your PRE-TAX salary.


This benefit is provided through a salary sacrifice, which means you receive childcare vouchers in place of a portion of your gross salary.  The result being that a basic rate tax payer will save the tax and national insurance elements (combined 32%), on the value of the vouchers purchased.  Savings are applied per working parent, and for a basic rate taxpayer, each parent (where there employer offers a scheme), can purchase a maximum of £243 in vouchers each month.

However, this scheme will be closed to new entrants from 6th April 2018.  In many cases, this will mean that you are approaching the last chance you will have to join the existing scheme and purchase the vouchers.

From 6th April 2018, the existing scheme will be replaced, for new applicants, with the ‘Tax-Free Childcare Scheme’.  This scheme is managed by the government, rather than your employer, and the savings are applied per child.  For every £8 paid in by you, the government will pay in an extra £2, equivalent to 20% of childcare costs.   With this scheme, you can receive up to £2,000 per year, per child, towards your childcare costs.

There are advantages to both schemes, depending upon your level of childcare costs, however it is important to note that your child needs to be in registered childcare in order to benefit from either of these schemes.   You couldn’t, for example, use these vouchers to pay grandparents.

It may be worth checking, under the existing scheme, if you can start contributing in advance of the baby being born, as the vouchers are paid into an ‘online bank account’ for you to use at any time.

For more information please get in touch with us.


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