Want to find out more? Check out our videos and FAQs. There’s also posters and fact sheets aimed at your employees, so you can make them aware of the upcoming changes.
Tools for employers
What are childcare vouchers?
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.
This scheme will close to new entrants in October 2018.
New parents must join a scheme and receive a childcare voucher by the closing date.
If they’re already registered for childcare vouchers they must receive at least one voucher in every rolling 12-month period. If it’s more than 12 months since their last childcare voucher, their eligibility has lapsed, so they need to receive one by October 2018 to stay on the scheme.
After October, they may lose their eligibility for childcare vouchers if:
- They move jobs (their new employer’s scheme won’t be able to accept new joiners after the closing date), or change PAYE payroll with their current employer
- They stop work, become self-employed, are made redundant, take an unpaid career break of longer than a year
- It’s more than 12 months since their last childcare voucher
- Their youngest child turns 15 years old
*Annual Employer’s NI savings for a Basic rate taxpayer taking the full £243 voucher value each month. 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 each month.
What is Tax-Free Childcare (TFC)?
The government is introducing a new scheme called Tax-Free Childcare (TFC). TFC is different to childcare vouchers, and 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.
When is TFC launching?
When Tax-Free Childcare (TFC) first launched in early 2017 it was only offered to parents of children who were under 4 years of age on 31 August 2017 (or who had their 4th birthday on that day). HMRC rolled out TFC to children under 6 on 24 November, children under 9 on 15 January, and children under 12 years old on 14 February 2018.
Government has also promised to make further improvements to the online application system, which has seen some issues. This means almost all parents should receive a response within five working days, and most get their decision instantly.
How do parents know which scheme to use?
We’ve created some useful tools that can help, but it’s possible that some parents will still be confused.
To make sure parents don’t miss out, they should join your childcare voucher scheme. They are then in a position where they can choose whether to switch to TFC in the future or stay with childcare vouchers by completing a Childcare Account Notice (CAN). You will need to stop their salary sacrifice and update their terms and coditions of employment. It’s important to remember that if they decide to join TFC, they can keep taking childcare vouchers through for three months after they first use TFC, but they must then cancel their voucher order. Crucially, they can’t then switch back to your childcare voucher scheme down the line.
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 costs.
If you don’t offer a childcare voucher scheme, why not talk to us about setting one up on our Salary Extras employee benefits platform?
Are you closing my childcare voucher scheme?
No. If you offer a Computershare childcare voucher scheme today you can keep it open as long as you like for employees that want to continue using it. But any new parents need to sign up and receive their first voucher by October 2018, and if a parent chooses to leave your scheme, they can’t re-join it at a later date.
Plus, as long as your scheme is open, you’ll continue to benefit from Employer’s NI savings.
Do I need to do anything right now?
Tell your employees the childcare voucher scheme will close to new entrants in October 2018.
Parents not yet registered on the scheme must join and receive a childcare voucher by the closing date.
If they’re already registered for childcare vouchers they must receive at least one voucher in every rolling 12-month period. So if it’s more than 12 months since their last childcare voucher, their eligibility has lapsed, and they need to receive one by the closing date to stay on the scheme.
After the closing date, simply 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.
If an employee is currently in a childcare voucher scheme managed through payroll, can they still stay in that scheme? Is that going to come to an end, or can they continue as long as they’re contributing an amount?
The scheme will continue to run for employees who are registered on their employer's childcare voucher scheme by October 2018. These employees can continue to request childcare vouchers through you for as long as they remain eligible. The need to receive at least one voucher in every rolling 12-month period.Close
Will employers have to pay more National Insurance contributions when people leave childcare vouchers?
Employers will continue to benefit from NI savings on the contributions of those employees that use the childcare voucher scheme. If you have a member of staff that currently receives childcare vouchers, and they decide that TFC is better for them, you will lose the savings from their voucher contributions, meaning your Employer’s NI contributions will go up.Close
How often can employees change between childcare vouchers and TFC?
Working parents can switch from childcare vouchers to TFC at any time, even after October 2018, but once they register for TFC and officially cancel their childcare vouchers by completing a Childcare Account Notice (CAN), they can’t switch back to childcare vouchers later on.
We would recommend that all parents join their employer’s childcare voucher scheme – they need to receive their first voucher by October 2018 - then take as much time as they need to decide which scheme is better for them and their family, for as long as they will be incurring registered childcare costs.
Can an employee join the childcare voucher scheme if they don’t have children yet?
No, they would need to have at least one child to be able to register for childcare vouchers. (The same rule applies for TFC).
If their child has been born, but they’re still on maternity/paternity leave, you could fund a childcare voucher as part of a ‘Keep in touch day’ or a day’s annual leave, as long as it’s before October 2018.
Are families no longer eligible where one of the parents earns over £100,000 a year?
Correct. A couple or lone parent would not be eligible for TFC if either parent or partner earns over £100,000 per annum.
This includes all income, not just salary. However, childcare vouchers are open to parents earning over £100,000 a year.
Generally speaking which parents will be worse off with TFC?
Assuming parents are eligible for both schemes, a very general rule of thumb is that for large families with higher childcare costs, TFC may be the better option. The lower the childcare costs, or the smaller the family, childcare vouchers may be the better option. However, there are lots of eligibility criteria for TFC, so deciding the better scheme can be confusing for parents.
A good starting point is for parents our Decision Tree.
If an employee has one child, and takes childcare vouchers - then after October 2018 has another child…can they have a TFC account for the other child?
You can only be in one scheme. Childcare vouchers are operated on ‘per parent’ basis, so both parents can have their own childcare vouchers account through their respective employer’s scheme. They can then use the vouchers in that account to pay for any child and for any carer, even if further children are born after October 2018.
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
Do we have to apply to HMRC to stay in the childcare voucher scheme after October 2018?
No, if an employee is enrolled within an existing childcare voucher scheme, then there is no requirement to apply to HMRC to continue to use the scheme.
If an employee decides to apply for TFC in the future, once their application has been made, they will have 3 months to advise their employer (or the childcare voucher provider) that they wish to cancel their contributions to the childcare voucher scheme by completing a Childcare Account Notice (CAN).
Does a childcare voucher scheme member need to be actively paying into their childcare voucher account as at October 2018 in order to retain their eligibility to pay into the scheme after October 2018?
No, as long as a childcare voucher has been received at least once in the preceding 12-month rolling period, they will remain eligible for childcare vouchers. The minimum amount can vary from scheme to scheme, but the minimum amount in the Computershare childcare voucher scheme is £20.Close
How will employees contribute to TFC? If employers won’t be involved, will parents have to pay by direct debit?
Parents will set up an online account for each child when they register for TFC – parents, and even their family members can pay directly into this account. How and when parents pay into a TFC account is entirely up to them. They can make one-off payments (for example, by debit card) or set-up a standing order to make regular payments into the account.
Working couple both paying Higher rate tax?
Here’s how one family is shaping up their options.
Are you a couple where one of you works and the other doesn’t?
This stay-at-home mum considers the future.
Both in work with high childcare costs?
With an expanding family, this proud dad discusses his family’s options.
Not using childcare vouchers at the moment?
This mum discusses her choices as she prepares to rely less on her parents for support.
Do you and your partner both pay Basic rate tax?
With one child in nursery and other turning twelve, this busy dad talks through his options.
Do you have a child with a disability?
If your child is registered disabled, it’s important you make the right choice for your family. This mum shares her thoughts.
Are you or your partner self-employed?
If one of you is self-employed, TFC is an option for you. This mum explains how she’s weighing up the situation.
Do you work part-time?
This mum grapples to understand whether TFC or childcare vouchers is better for her family.
Single parent relying heavily on childcare?
This mum has high childcare costs so it’s crucial she makes the right choice.