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Tax-Free Childcare, and the upcoming changes to Childcare Vouchers

If you're a working parent who pays for childcare, you're probably familiar with Childcare Vouchers. The government scheme was first introduced in 1989, and allows employers to offer their employees up to £55 a week of their wages as Childcare Vouchers - which you're not required to pay tax or National Insurance on. The scheme is invaluable to working parents, but as of October 4th, the system is changing. 

The government introduced Tax-Free Childcare in April 2017. The scheme will eventually replace the Childcare Vouchers that employers currently offer. The scheme will operate in a similar way - working parents may be eligible for up to £500 every 3 months for each child. You will have to use the money to pay for childcare through one of the government's approved providers. This will not affect the 30 hours of free childcare you may be eligible for.
For those already registered to the Childcare Voucher scheme, if you have received your vouchers at least once, you will continue to receive the vouchers - as long as your employer continues to run the scheme and you do not take an unpaid career break of longer than a year.

However, whilst some families and working parents will naturally benefit from the move to Tax-free Childcare, others are set to lose money under the new scheme. Fortunately, as there's still a few months to go, before Childcare Vouchers are closed to new entrants, there's time to figure out which scheme you'll benefit most from.

If you're self-employed, or a couple who earn less than £100,000 each, you will be eligible for Tax-Free Childcare - Childcare Vouchers were not available for self-employed people. If you're a parent with only one child, and childcare costs are particularly high for you then you may find that Tax-Free Childcare leaves you with more pennies than Childcare Vouchers.

However, if you do not fall into either of those categories, you're likely to find that Childcare Vouchers offer far more financial benefits. Find out exactly what you could gain or lose here. You can sign up to Childcare Vouchers through your employer at any time, and you'll continue to receive the vouchers after October 4th. Employers can also sign up to this scheme before the cut off date.

For those not signed up to either scheme, you are eligible for Tax-free Childcare or Childcare Vouchers (until October 4th) for every child you have under the age of 11, or under 17 and disabled.

The amount you are entitled to depends on the tax bracket that you fall into, as well as the amount your family already receives in benefits, your working hours and your salary. If you want to estimate how much you could be entitled to, you can complete a 5 minute survey on the government website.

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