If you or your employees are members of the Childcare Voucher Scheme, then you need to be aware of the changes that came into effect on 4 October 2018.
- The Childcare Voucher Scheme is no longer be available to new applicants.
- A new scheme ‘Tax-Free Childcare’ is now available subject to eligibility.
- Existing membership of the Voucher scheme will continue as long as your situation does not change. For example, if you leave your current employer or choose to take up the ‘Tax-Free Childcare’ scheme, you will no longer be eligible for Vouchers.
As ever, there are a lot of caveats to these changes which we have detailed in our blog below, covering:
- What is the existing Childcare Voucher Scheme?
- What changes came into effect on 4th October 2018?
- What is ‘Tax-Free Childcare,’ and am l eligible?
- How to Apply for ‘Tax-Free Childcare.’
- Summary of Tax and Employer Childcare Schemes.
If you have any questions, please do get in touch. We’re happy to help you understand what this means for your small business.
1. What is the existing Childcare Voucher Scheme?
- You can take up to £55 a week of your wages as childcare vouchers, which you do not pay tax or National Insurance on.
- The amount of Vouchers available depends on how much you earn and when you joined the scheme.
- Note on Tax Credits: Childcare vouchers may affect the number of tax credits you get. Use the childcare calculator to work out what support you could get.
2. What are changes came into effect on 4 October 2018?
From 4 October 2018, Childcare Voucher Schemes will close to new applicants. As an alternative, you may have access to the new ‘Tax-Free Childcare’ Scheme. The top 3 things to be aware of:
- If you were already a member of the Childcare Voucher Scheme, you can continue to receive childcare vouchers as long as:
- your wages have been adjusted to take Childcare Vouchers before the scheme closes in October 2018.
- you stay with the same employer, and they continue to run the scheme.
- you do not take an unpaid career break of longer than a year.
- If you successfully apply for ‘Tax-Free Childcare’:
- you cannot continue to claim childcare vouchers.
- you must tell your employer within 90 days. Your employer will then stop giving you new vouchers. Once you’ve told your employer that you’re getting Tax-Free Childcare, you cannot rejoin their voucher scheme.
- There is no deadline for using your vouchers.
You can continue to use any vouchers you already have, and can make a joint payment for childcare with ‘Tax-Free Childcare.’
3. What is ‘Tax-Free Childcare’ and am l eligible?
- You can get up to £500 every three months (£2,000 a year) for each of your children to help with the costs of childcare.
- The government will pay £2 for every £8 you pay your childcare provider via a ‘Tax-free Childcare’ online account.
- You can use it to pay for approved childcare.
- You can get both ‘Tax-Free Childcare’ and 30 hours free childcare if you’re eligible for both.
Your eligibility for Tax-Free Childcare is dependent on the following criteria for:
(a) You and your partner
(b) Your child and
(c) Your childcare provider.
(b) Your child (c) Your childcare provider
Note: This earnings limit does not apply if you’re self-employed and started your business less than 12 months ago.
(b) Your child
(c) Your childcare provider
4. How to Apply for ‘Tax-Free Childcare’
As part of your application, you will find out if you’re eligible for both ‘Tax-Free Childcare’ and 30 hours of free childcare. You may find out straight away, but it can take up to 7 days.
It takes 20 minutes to apply, and you will need the following information for you (and your partner, if you have one):
- National Insurance number
- Unique Taxpayer Reference (UTR), if you’re self-employed
To make an application go to:
You can make a payment for childcare the day after you put money in your ‘Tax-Free Childcare’ account. It usually takes 3 working days for the money to reach your provider’s account.
Want to know which scheme will benefit you the most? The answer will depend on your situation, and this handy childcare calculator will help you work out which type of support is best for you.
5. Tax and employer childcare schemes
You do not have to pay tax and National Insurance on:
- childcare vouchers
- childcare your employer arranges with a provider (sometimes known as ‘directly contracted childcare’)
- workplace nurseries.
You must pay tax and National Insurance on:
- cash your employer gives you to pay for childcare
- childcare provider’s fees your employer pays
- school fees your employer pays.