Changes to the Childcare Voucher Scheme

Written by Annie Lee on 20 January 2015

As childcare costs continue to rise, it becomes very important for working parents to take advantage of any cost saving opportunities towards these expenses. Childcare vouchers are a great way for employers to give working parents help towards their childcare. Each parent is entitled to up to £55 per week in vouchers, which are free from income tax and national insurance. This is treated as a salary sacrifice and the employer pays this amount to the childcare provider on behalf of the employee.

Changes to the childcare voucher system are coming into effect in Autumn 2015 and new parents in particular, need to be aware of these changes as well as understanding how this will affect them.

From this Autumn, eligible parents will be able to save up to £2,000 per child per year via a new simple online system whereby the government subsides 25% on top of what the parents pay. The vouchers will be held in an account controlled by National Savings and Investments (NSI) and are only eligible for Ofsted-regulated childcare. More parents will be entitled to this new scheme as it is not dependent on the employer offering it. It is available to self employed and part time workers; those on maternity, paternity or adoption leave; and those starting their own business who may not meet the minimum requirements. The scheme is available for all working parents, initially with children under the age of five, but within the first year of the scheme it is planned to extend this to children under twelve.  

Parents currently registered with their existing employer's childcare voucher scheme may remain with them, provided their employer continues to offer the scheme. If the parent changes employer after the new scheme has been introduced, they will lose this entitlement. Parents have a choice to move to the new tax free childcare scheme; however they cannot be in receipt of support from both schemes at the same time.

Not all parents will benefit from the new scheme, particularly if they have relatively low childcare costs, they will need to consider which scheme is more advantageous.

For more information contact Annie Lee, client director.

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Annie Lee
Corporate Client Director