Childcare Vouchers - Voucher scheme to remain open for extra six months

02 May 2018

SUMMARY

  • Under the Government’s original plans, there was to be a 5 April 2018 cut off in respect of new entrants to employer-provided childcare vouchers (CCVs).
  • This has now been pushed back for six months (i.e. until October 2018) because of problems with the new Tax-Free Childcare website.
  • The announcement was very ‘eleventh hour’ and many employers had already put in place systems changes based on the Government’s original plans for child care changes.

HELPING PAY FOR CHILD CARE : WHAT YOU NEED TO KNOW (SOURCE: GOV.UK)

15 hours free childcare

  • For families in England, receiving some forms of support
  • With 2-year-old children
  • 15 hours of free childcare or early education a week

15 hours free childcare

  • For all families in England
  • With 3 and 4-year-old children
  • 15 hours of free childcare or early education a week

30 hours free childcare

  • For working families in England
  • With 3 and 4-year-old children
  • An extra 15 hours a week of free childcare - so 30 in all
  • A total of 1,140 hours per year, that you can use flexibly with one or more childcare provider
  • For working families, including the self-employed, in the UK
  • With children under 12 (or under 17 if disabled)
  • For every £8 you pay in, the government will add an extra £2, up to £2,000 per child per year - that’s up to £500 every three months

Tax credits for childcare

  • For working families, in the UK
  • With children under 16 (or under 17 if disabled)
  • 70% of childcare costs, up to a cap

Universal Credit for childcare

  • For working families claiming Universal Credit, in England, Scotland and Wales
  • With children under 16
  • 85% of eligible childcare costs, up to a cap

Childcare vouchers (CCVs)

  • For working families, in the UK
  • With children under 16 (or under 17 if disabled)
  • Up to £933 a year in tax and National Insurance savings

If an employer offers childcare vouchers or arranges the childcare, employees can save up to £933 a year in tax and National Insurance savings.

The amount you can get in childcare vouchers depends on how much you earn and when you joined the scheme. You pay for your childcare before tax and National Insurance deductions are made.

You can’t use childcare vouchers at the same time as Tax-Free Childcare. Over time, Tax-Free Childcare will replace childcare vouchers and childcare arranged directly by the employer.

Childcare vouchers will remain open to new joiners until October 2018, not April 2018 as previously announced.

Parents already using childcare vouchers can continue to do so after this date, as long as the employer continues to offer them. The tax and National Insurance exemption for workplace nurseries will also continue.

COMMENT

The feedback we have received so far on the extension of the ESC scheme is that it has caused confusion for the HR network. Many employers have had to revert to their old systems rather than using the ones implemented in time to meet the government’s original plans, resulting in an increase in administrative burden for payroll and benefit providers. Meanwhile, with many working parents relying on the savings they make through their workplace childcare schemes, clarity is required and quickly.

Whilst the hope would be that the extension would be the final change to the governments plans, reports to date seem to imply this is not necessarily the case. We therefore continue to monitor the situation very closely with our network of benefit providers who are part of the Childcare Voucher Provider Association (CVPA) and will provide further commentary as and when appropriate. In the meantime we would urge the government to ensure a clear and transparent approach with regard to any further changes that may be being considered.