
To help with nursery fees, many working parents use childcare vouchers from their employers. While this nursery voucher scheme has been discontinued to new applicants, the UK Government has a replacement Tax-free childcare scheme to enable working parents to get 20 per cent off nursery fees.
Government Childcare Vouchers scheme
The UK Government’s Childcare Vouchers scheme was an initiative whereby some of your wages were converted into vouchers to go towards paying for childcare while you were at work. Your employer could take up to £55 a week from your wage, which would not be taxed or paid National Insurance on. This money would be given as vouchers which could be used to pay childcare providers and proved better value for money.
This scheme was closed to new applicants on 4 October 2018, but most people who received childcare vouchers before that date can continue to do so. It was replaced by the Tax-Free Childcare scheme.
Childcare Voucher providers
Most people who started the Childcare Vouchers scheme before 4 October 2018 can continue to receive them, provided they are with the same employer.
Employers use providers who handle claims for them. These providers deal with the administration, working with the parent’s employer and processing the vouchers for the childcare provider who receives them. Companies such as Edenred, Kiddivoucher and Computershare are continuing to handle vouchers under the old scheme.
A spokesperson from Computershare confirmed: “The Government moved from childcare vouchers to its Tax-free Childcare voucher scheme in the summer of 2018. We continue to provide childcare vouchers to parent employees of our clients who told us by October 2018 that they wanted to carry on with the scheme.”
Tax-Free Childcare
In this replacement for childcare vouchers, the Government will top up every 80p you pay towards childcare with an extra 20p. Since that’s what they usually charge in tax, the tax is essentially cancelled out. While this doesn’t sound like a lot of money, childcare can cost £1000 a month for full-time nursery. The Government would be paying £200 of this, meaning a £2400 annual saving.
The childcare included isn’t specific to nurseries, it can be any form of paid childcare you need to enable you to go to work.
If you are receiving childcare vouchers, you are legally required to tell your employer that you’re applying for Tax-Free Childcare instead. You must also show HMRC evidence that you’ve left that scheme.
Who is eligible?
To qualify for Tax-Free Childcare, you must:
- Be working. If you are a single parent only you need to work, but if you live with your partner you must both be working. If your partner is working and you are on a benefit such as Incapacity Benefit or Carer’s Allowance, you may still be eligible.
- Be earning at least £140 a week and less than £100,000 a year, each. If you’re self-employed, your average weekly wage will be used.
- A UK resident. If you were born outside of the UK you must be from an EU country or Iceland, Norway or Liechtenstein.
- The child you are claiming for must be aged 11 or under, or 17 if they have a disability. They must also be your biological child or adopted, you can’t claim for foster children.
You can apply for Tax-Free Childcare here.