Childcare Vouchers, do you know the changes?

can exchange part of their gross salary for Childcare Vouchers.

The exchanged part of the salary is exempt from tax and National Insurance contributions.

Childcare Vouchers can be used to pay for all types of “registered” and “approved” childcare including day nurseries, crèches, childminders, out of school clubs, holiday schemes, activity clubs and qualifying childcare offered by schools.

April 6th 2011 will see changes to the tax exemption on Childcare Vouchers to even the amount of tax savings available for all employees regardless of the tax rate they pay. As a result, higher and additional rate tax payers will see a reduction in the savings available from the scheme.

Currently all working parents can claim tax relief on £55 exempt income for each qualifying week. After the changes, higher and additional rate tax payers will have their relief reduced to £28 and £22 respectively.

Important facts

1. Changes only apply to higher and additional rate tax payers who join the scheme after 6th April 2011
2. Parents already part of an approved scheme will see no changes to the savings that can be made
3. Higher and additional rate tax payers with a child, not currently on the scheme but think they may use childcare in the future should consider joining the scheme before the 6th April 2011 to secure the higher level of savings.

Citation’s Employment Law Consultants and 24/7 Helpline advisors have advised clients on the recent changes. If you are worried that your business is not properly conforming to current employment law, then a Citation employment law Consultant can help.