For many families, childcare vouchers will save them more money than Tax-Free Childcare (TFC). Help your staff understand what’s best for them.
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Useful downloads so you can explain TFC and promote childcare vouchers.more
How childcare vouchers work today
At the moment, you can offer your staff a childcare voucher salary sacrifice scheme. The scheme saves you up to £402* a year in Employer’s National Insurance (NI) contributions for each employee on the scheme. It also allows employees to save up to £933* a year in tax and NI.
The childcare voucher scheme will continue to run for parents who are already on it, and have received a voucher in the last rolling 12-month period, but it will close to new entrants from 6 April 2018.
*Please take a look at ‘The nitty gritty’ below to get into the detail.Close
What’s Tax-Free Childcare all about?
The Government is introducing a new scheme called Tax-Free Childcare (TFC). TFC will be different to childcare vouchers, and will not be offered through employers.
TFC will work a bit like a savings account. Parents pay money into an account from their net pay, so it’s taken after tax and National Insurance have been deducted. Then for every 80p they pay in, the Government adds 20p. Parents will need to pay in £8,000 to reach the maximum Government contribution of £2,000 per child per year.
Many parents will be better off with childcare vouchers
It's not easy for parents to work out whether TFC or childcare vouchers is best for them as there is a number of eligibility criteria, including:
- Parents can only use TFC for children under the age of 12, or 17 for children with disabilities
- They need a separate TFC account for each child
- Both parents must be working, unless they are a lone working parent
- Both parents have to meet the minimum income level for TFC i.e they must reasonably expect to earn the equivalent of 16 hours National Living Wage/ National Minimum Wage rate a week (from April 2018 this is £125.28 per week on average) for the next 13 weeks
- They can’t use TFC if they or their partner (if they have one) earn more than £100,000 a year
- They can’t use TFC if they receive tax credits or the childcare element of Universal Credit
We’ve created some useful tools that can help, but it’s possible that some parents will still be confused. What we know for certain is that to make sure parents have a choice, they need to be in a childcare voucher scheme now. If you have a scheme with us, we can help you promote it to your employees before it closes to new entrants, ensuring they don’t miss out on vital savings on their childcare.
If you don’t offer a childcare voucher scheme, why not talk to us about setting one up? It’s free and only takes a few minutes.Close
Don’t worry, we’re not closing your scheme
If you offer a childcare voucher scheme today you can keep it open as long as you like for employees that want to continue using it. But you won’t be able to sign up any new parents after 6 April 2018, (it’s important to remember that they must have received their first voucher by 5th April), and if a parent chooses to leave your scheme and completes a Childcare Account Notice, they can’t re-join it at a later date.
We’re in it for the long haul, so we’ll be managing your scheme for as long as you have employees registered on it.
And as long as your scheme is open, you’ll continue to benefit from Employer’s NI savings.
Not with us? Make sure your childcare voucher scheme provider will continue to administer your scheme for as long as you need. If not, you can switch providers, even after April 2018Close
What should I do next?
Most importantly, keep your childcare voucher scheme open for employees that would still like to use it. You’ll still make Employer’s NI savings and it’ll really help them to manage their childcare costs and work-life balance.
We’ve put together a toolkit to help you promote your scheme and explain TFC to your employees. This will help them to make the right choice once TFC launches. If you have a scheme with us, we’ll also talk to your employees who take childcare vouchers, to help them understand their options.
- Let your employees know that your childcare voucher scheme will still run after it closes to new entrants
- Parents who want to join the scheme must register and receive their first voucher by 5 April 2018
- Parents already registered on the scheme must receive at least one voucher in every rolling 12-month period. If more than 12 months has passed, their eligibility has lapsed and they must receive a voucher by 5 April 2018.
- Crucially, once they join TFC and officially cancel their childcare vouchers by completing a Childcare Account Notice (CAN), they can’t switch back to childcare vouchers later on. But they can switch from childcare vouchers to TFC at any time, even after April 2018
- Share this website and tools with them to help them understand their options
I'm worried about losing my Employer’s NI savings
If you’re worried about how you’ll replace any lost Employer’s NI savings, we can help you develop an employee benefits strategy with other tax-efficient employee benefits.
There’s lots of positives to a rounded employee benefits package, and if you’d like to talk to us about how we can help, visit our website to see how we’re bringing value back to benefits.Close
What are our legal obligations as an employer?
The employer has no role within the Tax-Free Childcare scheme. However, you may be asked by National Savings & Investments, the administrators of the scheme, to confirm that an employee is not in receipt of childcare vouchers as part of the parent’s TFC application process. Close
The nitty gritty
*Annual Employer NI savings for a Basic rate taxpayer taking the full £243 voucher value. The maximum savings available will be less for Higher and Additional rate taxpayers.
Employee savings are based on a Basic rate taxpayer taking the full £243 voucher allowance over a 12 month period.Close