The Low Incomes Tax Reform Group (LITRG) is urging people who wish to claim childcare vouchers to act before 4 October 2018.
The Government will withdraw the tax and national insurance relief associated with childcare vouchers1 for brand new applicants from 4 October 2018,2 with Tax-Free Childcare (TFC) providing help with childcare costs instead. For anyone who has not claimed childcare vouchers yet, it means they need to join in time for their employer to action their application and provide the voucher by their last payday before 4 October. If an employer has already finalised their payroll, it may be too late to join, but anyone who may be eligible should check now and take action.
TFC can be claimed instead of childcare vouchers but the rules for the TFC scheme are different. LITRG is reminding people that although some will be better off under the TFC scheme, others will benefit more from childcare vouchers.
LITRG Chair Anne Fairpo said:
“Individuals need to check their own position carefully because whether they qualify for either the TFC or childcare vouchers scheme and how much help they can get, depends on a number of factors including hours worked, income, number of children and the amount of childcare costs.
“We urge the Government to provide a telephone support service to help people make the right choice between all of the many childcare offerings and to make improvements to the current childcare calculator.”
Anyone who is already receiving childcare vouchers, or was provided with a voucher in any of the 52 tax weeks ending on or after 4 October 2018, will continue to benefit from the tax and NI relief for the foreseeable future as long as they stay with the same employer, their employer continues to offer the scheme and they do not have a gap of more than 52 weeks between vouchers. However, brand new applications for childcare vouchers will no longer be possible from 4 October 2018.
This means prospective applicants who wish to claim childcare vouchers will have to do so in time for at least one childcare voucher to have been provided by 4 October 2018. In practical terms, they need to join in time for their employer to action their application and provide the voucher before that date. For some people, it may already be too late.
Anne Fairpo said:
‘It can be difficult for people to work out which childcare scheme is best for them. Alongside childcare vouchers and TFC, childcare help is also provided through the tax credit and universal credit systems. In some cases, making an application for one scheme can end financial support under another and so people must ensure they check their position carefully before making any applications.
‘The Childcare Choices website offers a calculator to help people make these choices but it does not currently include universal credit and it may not give accurate answers for those with more complex circumstances such as variable childcare costs. We advise people to contact a local advice agency3 for help to make sure they make the best decision based on their own circumstances.”
- Similar rules apply to directly-contracted childcare provided by employers which will also be replaced by the TFC scheme. Workplace nurseries are not affected by the introduction of TFC.
- The Government confirmed their intention in Budget 2016 to remove the tax and NI relief for childcare vouchers and directly-contracted childcare from April 2018 to brand new applicants (see Para 2.77 here), this was subsequently extended to 4 October 2018 - see here and here.
- Local advice agencies can be found using this postcode tool https://advicelocal.uk/ provided by LASA.