Tax Free Childcare
The Government confirmed last week that it will not be introducing the proposed changes to tax-free childcare until 2017.
At present employees can salary sacrifice up to £55 per week (or £243 per month), per working parent, towards the cost of childcare vouchers.
This scheme allows individuals to pay wages over to a childcare provider, before tax and national insurance is taken from their wages and can result in savings of up to 32%, when considering the savings on payment of tax and national insurance. The maximum amount that can be sacrificed, per working parent, towards childcare vouchers is currently £2,916.
The Government has proposed changes to the tax-free childcare system which would mean that, before tax is paid, instead of sacrificing wages towards childcare costs, employees will be able to put up to £10,000 away towards childcare costs, for each child, to which the Government will contribute up to 20% of this. This would result in a saving of up to 20% on childcare costs and would likely be more beneficial to parents who have high childcare costs.
It is these current proposals that have now been shelved until 2017.
The current system will be open to new applicants and existing individuals receiving childcare vouchers, until such time as the Government introduce the new scheme. Once the new scheme is introduced employees will be able to continue under the existing scheme, if they are already a member of the same, unless one or more of the following applies:
For those of you considering having children, it is worth bearing in mind the proposed changes. Once the new scheme is introduced you will not be able to join the current scheme, if you are not already a member and you could potentially save more under the current scheme.
Do you have any questions about childcare schemes (which may or may not be run by your employer) or do you need further information regarding childcare vouchers and what your employment rights are relating to family matters?
This scheme allows individuals to pay wages over to a childcare provider, before tax and national insurance is taken from their wages and can result in savings of up to 32%, when considering the savings on payment of tax and national insurance. The maximum amount that can be sacrificed, per working parent, towards childcare vouchers is currently £2,916.
The Government has proposed changes to the tax-free childcare system which would mean that, before tax is paid, instead of sacrificing wages towards childcare costs, employees will be able to put up to £10,000 away towards childcare costs, for each child, to which the Government will contribute up to 20% of this. This would result in a saving of up to 20% on childcare costs and would likely be more beneficial to parents who have high childcare costs.
It is these current proposals that have now been shelved until 2017.
The current system will be open to new applicants and existing individuals receiving childcare vouchers, until such time as the Government introduce the new scheme. Once the new scheme is introduced employees will be able to continue under the existing scheme, if they are already a member of the same, unless one or more of the following applies:
- They change employer
- Their child has reached its 15th birthday (or 16th if disabled)
- They do not receive childcare vouchers within a 12 month period
- They complete the exit form and open up a new tax free childcare account, under the new proposed scheme, with National Savings and Investments
For those of you considering having children, it is worth bearing in mind the proposed changes. Once the new scheme is introduced you will not be able to join the current scheme, if you are not already a member and you could potentially save more under the current scheme.
Do you have any questions about childcare schemes (which may or may not be run by your employer) or do you need further information regarding childcare vouchers and what your employment rights are relating to family matters?
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