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Childcare voucher schemes to close in April 2018

Article posted: 4th January 2018

A timely reminder that childcare voucher schemes will close to new entrants from April this year. All eligible new parents will instead need to use the government’s new tax-free childcare (TFC) scheme. The voucher scheme, which is administered through payroll, will continue to run for parents who are already on it.

TFC will work in the same way as a savings account with eligible parents paying money into an account from their net pay, so it’s taken after tax and National Insurance have been deducted. For every 80p they pay in, the government adds 20p. Parents will need to pay in £8,000 to reach the maximum government contribution of £2,000 per child per year.

Currently, employers can offer staff a childcare voucher salary sacrifice scheme of up to £243 a month, which allows employees to save up to £933 a year in tax and NI. The scheme saves employers up to £402 a year in Employer’s National Insurance (NI) contributions for each employee on the scheme. (These figures are based on basic rate taxpayers’ allowances under the scheme.)

Employees can switch from childcare vouchers to TFC at any time, even after April 2018. However, once registered for TFC they can’t switch back to childcare vouchers later.

To learn more about the changes and answer employee questions, please visit: https://www.childcarechoices.gov.uk/.

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