Current Childcare Voucher Scheme Ends Autumn 2015
As announced in The 2013 Budget, the current childcare voucher scheme will be changing in Autumn 2015, making it available to lots more people. However, if you are not currently signed up to the current scheme but are eligible, then you may want to consider looking into it now in order to save £1,000’s!
The Current Scheme
So for those of you who aren’t aware, the current childcare voucher scheme is basically a government initiative aimed at helping UK working parents benefit from their tax efficiencies in order to save money on childcare. Currently, parents are able to sacrifice part of their salary in order to obtain childcare vouchers of an equal amount. The big attraction of doing this is, you don’t have to pay any tax or National Insurance on the amount contributed to the scheme, which is where the big savings come into it.
For example, a parent who is given £55 per week (£243 per month) in child care vouchers after taking a salary sacrifice of the same amount, will benefit by saving £933 tax/NIC. So as you can see, it is definitely a worthwhile scheme which has proven to of worked well. Any parent can apply for this, even if your partner doesn’t work,
The New Tax-Free Scheme
The new tax-free childcare states that if you and/or your partner work, then every £80 spent on childcare, the government will contribute up to £20. Unlike the current voucher scheme which is only available to those whose employer offers it, the new scheme is open to anybody who fits the requirements.
There are pros and cons to both schemes. If you find that your personal circumstances mean that you would be making bigger savings from the current voucher scheme, then you are free to stick with it even when the tax free childcare comes into practice. However, if by Autumn 2015 you haven’t signed up to the voucher scheme but you want to apply, you will only be offered the tax – free childcare scheme so now is the time to act.
Tax-free childcare will provide higher savings for many parents, including the self- employed and those with high childcare costs. However, some parents are better off under the current arrangements.
The new scheme will not be available to families where either parent earns over £15,000, whereas the current scheme offers high earners the opportunity to enjoy tax savings at the same level as basic-rate taxpayers.
The new arrangement also doesn’t provide any National Insurance savings which could be a significant loss to some people.
So for those of you who aren’t already using childcare vouchers, there’s still time to get your company involved! Remember, employers enjoy National Insurance savings from the current scheme so it would be in their best interest to set up a scheme before the 2015 deadline!