Changes to Childcare Voucher Legislation

From 6th April 2011, all tax payers will still be able to benefit from using Childcare Vouchers. However, to retain the existing level of benefit, higher rate tax payers needed to have joined a scheme before this date.

What Are The Changes?

From 6th April 2011, changes to Childcare Voucher Legislation will take place affecting higher rate tax payers which means they will only be eligible to receive £28 per week in Childcare Vouchers unless they are already in an existing scheme.

There is no change for basic rate tax payers; they will remain eligible to receive the maximum amount of £55 per week.

Why Are The Changes Taking Place?

These changes are designed to equalise the tax benefits for higher rate and basic rate tax payers.

From 6th April 2011, all employees will receive the same level of income tax exemption of £11 per week.

Who Are Affected By The Changes?

New joiners to the scheme on or after 6th April 2011.

Employees already in an existing scheme before 6th April 2011 remain unaffected; regardless of their tax band.

For further information please download http://www.hmrc.gov.uk/thelibrary/employee-qa.pdf

Childcare Vouchers can be used to pay for all forms of registered childcare for children up to the age of 16. As part of a salary sacrifice scheme, each working parent may save up to £1,196* per year. To benefit from the scheme, parents simply exchange a part of their salary for the same amount of Childcare Vouchers and use them to pay the childcare provider of their choice. A popular employee benefit, Childcare Vouchers are non-taxable (up to £243 per parent, per month or £55 per parent, per week) and do not attract employer or employee National Insurance contributions. This saving can help significantly towards a parent’s childcare costs.