Changes to Childcare Vouchers
With the Government’s introduction of tax-free childcare in 2017, employer led childcare voucher schemes are being closed to new entrants from Autumn 2018. We will be able to accept new members and new voucher orders due to the Governments extension. Read more about changes to Childcare Vouchers.
Childcare vouchers are a Government scheme designed to help parents afford high quality childcare. UCL operates a Childcare Voucher scheme with Kiddivouchers Ltd. This is a benefit that lets parents make substantial savings against the cost of their childcare. You can use childcare vouchers for many different kinds of childcare, ranging from nurseries and childminders through to out-of-school activities, breakfast clubs and afterschool care for older children.
The scheme is open to all UCL employees in receipt of a monthly salary. The only stipulations are that you are the legal guardian of the child for which the childcare vouchers are going to be used and that after taking the salary sacrifice your pay does not fall below National Minimum Wage.
Employees who joined the scheme on or after 6th April 2011, can take the following maximum amount of vouchers free from tax and National Insurance Contributions:
£243 per month for Basic Rate Tax payers
£124 per month for Higher Rate Tax payers
£110 per month for Additional Rate Tax payers
These rates were set in order to even out the amount of tax relief available to all.
If however you joined before 6th April 2011, you can claim £243.00 of vouchers free from tax and National Insurance Contributions irrespective of your marginal tax rate.
New Tax-Free Childcare scheme from Autumn 2017
The Government used the 2013 Budget to announce that a new tax-free childcare voucher scheme would be introduced in 2015 but the launch was delayed until 2017. Tax-free childcare was expected to provide parents with tax savings of up to £1,200 per child each year.
Following a consultation exercise, the Government has published more details about the tax-free childcare scheme.
The level of childcare costs covered by the new scheme has been increased since the original announcement. Initially, a 20% tax break was expected on the first £6,000 of childcare costs, providing savings of up to £1,200 per child. The scheme has now been extended to cover annual childcare costs of up to £10,000, providing savings of up to £2,000 per child.
Parents will be able to sign up for Childcare Vouchers until until Autumn 2018 and it is expected that they can then continue to order vouchers for as long as UCL continues to run the scheme. Some existing scheme members may choose to switch to the new scheme, as in some cases this will provide higher savings.
The new scheme is expected to initially only be available in respect of children under 5 although there are plans to make it available for all children under 12 within one year.
Issues to consider
- Tax-Free Childcare will provide higher savings for many parents, including those with high childcare costs. However, some parents are better off under the existing arrangements.
- Parents who sign up to the current Childcare Voucher scheme will be able to remain in the scheme, so they will not be disadvantaged by the proposed 2017 changes. However, if they move to a new employer after the 2017 Tax-Free Childcare is in place, they will be considered to have left the current scheme and be forced to switch to the new arrangements.
- Some parents will not be ready to use Childcare Vouchers until after the new scheme starts. In some cases, these parents will receive lower savings from the new arrangements than they would have had under the current scheme.
- The new scheme will not be available to families where either parent earns over £150,000, whereas the current scheme allows high earners to enjoy tax savings at the same level as basic-rate taxpayers.
- The new arrangement will not provide any National Insurance savings (currently worth up to 12% for basic-rate taxpayers).
In general, parents will only be better off under the new scheme if their childcare costs are higher than the figures shown in the table below. Parents with lower childcare costs would be better off with childcare vouchers.
If you would like to use the following calculator for a more accurate check on your personal situation please use the Tax Free Childcare Voucher Calculator.
Level of monthly childcare costs after which tax-free childcare becomes the better option
Single parent, basic-rate taxpayer
Single parent, higher-rate taxpayer, joined childcare vouchers before 6th April 2011
Single parent, higher-rate taxpayer, joined childcare vouchers after 5th April 2011
Couple, both basic-rate taxpayers
Couple, one basic-rate taxpayer, one higher-rate taxpayer who joined childcare vouchers after 5th April 2011
Couple, both higher-rate taxpayers who joined childcare vouchers after 5th April 2011
To find out more information or to join the childcare voucher scheme you can log on to Kiddi Vouchers and register your details.
You will also need UCL's scheme reference number which is S910484a
There you will also find a calculator which will let you know how much you can save per month.
If you have any queries please contact Emma Sweeney in Payroll and Pension Services on ext 58861 (020 3108 8861) or email firstname.lastname@example.org, alternatively visit the Kiddi Vouchers website or call Kiddivouchers on 0800 612 4395