Childcare vouchers scheme

By June 5, 2017Payroll Outsourcing

The Childcare Vouchers Scheme closes to new joiners in April 2018.

If an employer chooses to offer a Childcare Vouchers Scheme, it is possible for employees to purchase childcare vouchers through payroll as a salary sacrifice.  A maximum fixed amount can be provided free of tax and National Insurance, and the employer does not have to report anything to HMRC as long as the amounts are below these thresholds.

The scheme is still live, companies can still join, and employees can join existing schemes.  After April 2018 these schemes will continue to run but will be closed to new joiners.

Thresholds

The limits for childcare vouchers are as follows:

For an employee that joined the scheme before 6th April 2011:  £55 per week or £243 per month

For employees that joined on or after 6th April 2011:

Rate of Income Tax Weekly Limit Monthly Limit
Basic £55 £243
Higher £28 £124
Additional £25 £110

If the contributions exceed these limits then the benefit would be reported through a P11D (or payroll if applicable) and class 1 national Insurance is due on the amount above the limit.

Childcare Options

Salary sacrifice is a benefit that is received in exchange for a reduction in salary.  So if you are considering offering childcare vouchers as a salary sacrifice scheme, advice should be sort for the implications to your company and employees.

There are now far more options for tax free childcare, and parents can already apply for these.  Childcare providers should have this well in hand, as the roll out of the new schemes have already started.

The new schemes do not need to be put through the payroll and it appears that parents will have more control.  Tax-Free Childcare cannot be used at the same time as childcare vouchers, and HMRC have online calculators parents can use to try and work out which scheme is best for them.