Childcare Voucher Scheme

Childcare Voucher Scheme

Q- My client’s employee wants to join their childcare voucher scheme but has heard that the scheme is being removed. Can the employee still join and what do the changes mean for my client?

A- On 5 October 2018, childcare voucher schemes will close to new applicants, meaning your clients are likely to receive an influx of questions from employees with young children who make use of the existing provisions. It is therefore important for your clients to familiarise themselves with these new developments and what this means for the existing voucher scheme.

Under the current scheme, clients can enable employees to take up to £55 per week of their wages as childcare vouchers, which can provide a tax-free sum of money for Government-approved childcare costs. This can help their workers to arrange appropriate childcare without excessive inconvenience, with how much they can take being dependent upon their annual income. The vouchers can be used for registered childminders, home care agencies or staff nurseries.

From October of this year, the new tax-free childcare scheme will replace childcare vouchers, enabling employees to receive up to £500 every three months directly from the government for the same use. To be eligible, employees will need to earn the minimum wage for at least 16 hours per week and take home no more than £100,000 per annum. Applications will be made directly via the Government’s website.

In light of this, clients should be advised that, whilst the scheme will be closed to future applicants, employees can continue to join the scheme until 5 October and remain in it after this date providing they have received their first voucher before the closure date. Following this, clients will be able to maintain the old scheme for these employees but will not be able to accept any new applications.

It is also important to inform all staff that those currently benefitting from the old childcare voucher scheme can swap to tax-free childcare if they wish but must inform their employer within 90 days. It will be down to the employees to decide which scheme would be better for them and clients may want to suggest that they use the online calculator provided to calculate this on the Government’s website. Once an employee has swapped over to tax-free childcare, they will not be able to return to the childcare voucher scheme.

Clients should take reasonable steps to ensure that employees are fully up-to-date with these key developments and are fully aware of the official company response. This will help employees to feel part of an inclusive and flexible organisation, increasing overall morale through helping to ensure that they can properly afford appropriate care for their young children.

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