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Childcare vouchers – don’t miss out!
The introduction of Tax-Free Childcare means that, from April 2018, working parents will no longer be able to join their employer’s childcare voucher scheme. Nottingham chartered accountants, Clayton & Brewill explains more about childcare vouchers and why it’s important that employers and parents act quickly to ensure they don’t miss out on the associated savings.
What are childcare vouchers?
Childcare vouchers are a government-approved, tax-efficient way of paying for childcare. Employers can offer a scheme, in which eligible employees can exchange up to £243 a month of their gross salary for vouchers. The salary used in exchange for vouchers will be exempt from tax and National Insurance contributions (NIC).
Childcare vouchers can then be used to pay for childcare providing the childcare is undertaken by a registered provider.
Who is eligible to join a childcare voucher scheme?
Providing their employer provides a childcare voucher scheme, employees can join as long as they are earning above the national minimum wage once the childcare vouchers are deducted.
What are the benefits of childcare vouchers?
Childcare vouchers can save each parent up to £933 per parent in tax and NIC savings. A family could potentially have a yearly saving of up to £1866.
Employers also benefit and can save up to £402 per employee per year in NIC. Although there are costs in implemented a scheme, these are generally less than the NIC savings.
As well as the monetary benefits, offering a childcare voucher scheme can help with employee engagement and can help encourage employees to return to work following maternity leave.
What’s changing?
Due to the introduction of Tax-Free Childcare, childcare voucher schemes will be closed to new joiners from April 2018.
Childcare vouchers allow parents to save 32% on every £100 spent on childcare (based on a basic rate taxpayer), whilst Tax-Free Childcare will result in a 20% saving on every £100 spent. Based on this, it is likely that childcare vouchers will be a more cost-effective option for many parents, so it’s important they don’t miss out.
As an employer, how can I ensure we don’t miss out?
Although childcare voucher schemes will be closed to new joiners from April 2018, those who are already enrolled on a scheme will be able to continue to receive the associated savings, as long as the child is eligible and they remain with their employer.
Employees must be enrolled in the scheme before their March payroll. If you already have a scheme set up, you need to ensure you communicate this deadline to your employees and ensure they are aware of the associated benefits.
If you don’t have a scheme, it’s worth considering setting one up and enrolling eligible employees, prior to the deadline.