Childcare Vouchers are a government tax initiative, suitable for all employers, designed to help working parents save money on their registered childcare costs via reduced tax and National Insurance contributions.

 

Childcare Vouchers are a great employee benefit, yet many businesses haven't found the time to get a scheme in place.

 

The Government is planning to reduce the level of tax relief on Childcare Vouchers for higher and additional rate tax-payers who sign up after 6 April 2011. A higher (40%) or super (50%) rate taxpayer joining a scheme after 5 April will only receive income tax relief at the basic (20%) rate. However, employees who are already in a scheme by 5th April will not be affected by these proposed changes as long as they remain within the scheme.

 

If you are a higher rate taxpaying employee who pays for registered childcare, ask your employer if they will set up a Childcare Voucher scheme now to beat the April deadline, and be eligible for savings of up to £1,200 next tax year and beyond – but you'll need to act quickly. If you sign up to a scheme on or after 6 April, the rules change for new entrants and the savings halve.

 

If you're already in a scheme, there is no need to worry, your tax savings will continue. Otherwise, now is the perfect time to act, whether you are an employer or a parent!

 

Basic rate taxpayers are not affected by these changes.

If you are an employer, operating a Childcare Voucher scheme can help you achieve NI savings of up to £373 per employee, per year. For example, with 20 employees in the scheme your business might save over £7,000 per year as well as improving staff morale!

 

This is only a broad summary of the scheme and the proposed changes. Specific advice should always be taken in relation to your own circumstances.