Are you or your working parent employees currently taking advantage of childcare vouchers via salary sacrifice? If so, are you aware that the rules are changing?

What’s new?

Tax-Free Childcare (TFC) has been introduced by the government which will change how parents approach childcare costs. The new scheme requires working parents to claim top-ups for childcare costs instead. The government will add £2 for every £8 spent up to a limit of £2,000 savings per year, per child under the age of 12.

TFC represents a 20% on childcare costs up to a maximum of £2,000 per year. However, there has already been many teething problems for parents registering, who will also be obliged to reconfirm their status and eligibility every 3 months.

Under the current Childcare Voucher scheme, parents can save up to £933 per year, per parent for children aged up to 16. Childcare Vouchers will continue to operate alongside the new scheme, however, employees will no longer be able to join a Childcare Voucher scheme from April 2018.

From September 2017, free childcare for 3 to 4 year olds will double from 15 to 30 hours per week for families living in England. However, not all nurseries are offering the 30 hours. To be eligible families must earn at least £120 per week and less than £100,000 per year.

How does this impact on my employees?

It really depends on each parent’s situation as to whether they will be financially better off on a Childcare Voucher or a Tax-Free Childcare scheme. You cannot benefit from both. The Childcare Voucher Providers Association offers a good comparison overview here: http://www.cvpa.org.uk/CVPA/About_Tax-free_Childcare/CVPA/About_Tax-free_Childcare.aspx?hkey=1d4e5c2f-74c6-4491-8333-f9e6e1ef25ad

We would recommend communicating as soon as possible these changes to existing and new employees if you have not already, so that they do not miss out once Childcare Voucher schemes close to new entrants in April. Your employees may need to take independent advice to decide which scheme would be more advantageous for their personal financial circumstances.

What does this mean for my business?

Childcare Vouchers are currently managed by employers, whereas the new TFC scheme requires employees to set up an account with NS&I directly.

Employers do not get involved in TFC, although you will of course need to continue managing Childcare Voucher schemes as long as you have staff who are members.

How we can help

Business Garage offers a comprehensive range of outsourced services, and HR is one of our strengths. We can help you navigate the bumpy road of Reward and Benefits – or avoid the potholes of Employee Relations issues! Call us today on 01235 433099 to discuss how we can help your business.

Resources:

Edenred Working Parents Zone: https://www.edenred.co.uk/

Childcare Voucher Providers Association: http://www.cvpa.org.uk/

See your childcare choices on the government portal: https://www.childcarechoices.gov.uk/

http://www.tax-free-childcare.info/