Childcare Vouchers – 6 Month Extension

Last week (13th March) the Government announced that it would be keeping the childcare vouchers scheme open to new entrants for up to another 6 months. Labour forced a vote through on the issue as well as other childcare-related issues and as a result the Education Secretary, Damian Hinds, has agreed to extend the scheme.

Despite this, Hinds was still bullish about the new tax-free childcare system being an improvement on the current system as it means more people will be eligible, regardless of their employer.

The new Government backed tax-free childcare scheme is already up and running and working parents (including self-employed) that earn in excess of £120 per week but less than £100,000 per year may be eligible.

For every 80p that is contributed by parents the Government will top up by a further 20p up to £2,000 per child or £4,000 if the child is disabled.

Since its launch in 2017 the scheme has encountered problems, the main criticism is the fear parents may have to pay childcare costs up front.

What is clear is that the Government needs to lay bare its plans for the future of the schemes as the decision to extend the childcare vouchers scheme has caused some uncertainty and some believe that the extension may become permanent.

This has caused concern with some larger employers as they may have spent considerable time and money on closing schemes and there will be a decision to make on whether to re-open the scheme.

There is obviously less disruption for smaller employers and the voucher scheme is a great benefit which I would urge all smaller employers to take advantage of while they can (there is a Tax and NI benefit for the employer as well as the employee under the salary sacrifice arrangement).

All employers should be making their employees aware of the situation so that as many employees as possible have the opportunity to join the scheme before the 6 month extension period ends.

Thanks,

Stuart



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