The Childcare Voucher Scheme was a successful plan that allowed employed parents an opportunity to forgo a portion of their pre-tax salary so they could register for paid childcare. The scheme meant that the parents could save on their Tax and National Insurance (nearly £933 per parent each year).
Here’s how the scheme works
The parents have to sacrifice a part of their salary for the Childcare Vouchers to work. However, the employee could sign a salary sacrifice arrangement that reduces their entitlement to cash payments in exchange for non-cash benefits.
The Childcare Voucher Scheme would require employees to part with a portion of their pay and get Childcare Vouchers in return. If they want to benefit from the savings, the employees must use Childcare Vouchers for registered childcare payments only. The maximum amount that each parent can sacrifice from their salary into the Childcare Voucher account is a maximum of £243.
Any parent in the UK, who had signed up for the Childcare Voucher Scheme via their employer before October 2018 and sacrificed at least one portion of their salary into their account in the past 52 weeks, can carry on availing Childcare Vouchers to reimburse for their childcare. But they have to keep their eligibility in mind.
The eligibility criteria for the parent are:
- The parents must stay with the same employer
- Sacrifice at least one portion of their salary every 52 weeks.
- The parents must not change their plan and join Tax-Free Childcare instead.
If a parent/employee wants any changes to their sacrifice arrangement, the employer must also alter their employment contract. The contract must suggest each cash and non-cash claim at all times.
Temporary pause on contributions
Under certain situations that will last for a short period, like maternity leave when the childcare is unused, they can temporarily pause the agreement. They also can reduce the amount contributed to the Childcare Voucher given their employer agrees with the changes. If the employee and the employer agree on the temporary changes, they must also change the employment contract. The general advice for parents is to reduce the amount and keep paying rather than pause the agreement. It will help them remain eligible for the scheme and increase their contribution in the future.
To do so, the parents must tender a change request with their employer via eVouchers or, online Childcare Voucher account. Since different employers will have different rules defined for changes and the ‘cut-off date,’ the parents need to discuss the topic with their employer.
Tax-Free Childcare
Tax-Free Childcare replaced Childcare Voucher Scheme in October 2018. Those parents who registered with Childcare Voucher before October 2018 would continue to use it until their eligibility date. Others had a new option of registering for Tax-Free Childcare.
The eligibility required both the parents to be working with a total weekly income of £120 or above. But if either of the partners earns over £100,000 per annum, they are not eligible. Under the scheme, the government can pay up to £2,000 a year per child (a contribution of £2 for every £8 the parents pay up to the £2,000 limit). The parents can use the money to pay for various regulated childcare like after-school clubs, nurseries, childminders etc.
Concluding Note
Currently, Tax-Free Childcare is an overall scheme benefitting hundreds of young parents across the UK. You can, too, check with your employer and find out if you’re eligible for the plan. Meanwhile, if you’re looking for a nursery, Cheeky Chums offer the best childcare service in the UK.
