Childcare scheme update
The childcare voucher and directly contracted childcare schemes closed 4 October 2018. In time, these schemes will be replaced by the roll-out of the new Tax-Free Childcare: this offers parents £2,000 per year per child towards approved childcare costs. (This is extended to £4,000 for disabled children.)
In a recent article HMRC confirmed the following instructions for employers:
- Employees who joined a scheme and had the necessary changes made to their salary on or before 4 October, will see no change. Both you and your employees will continue to benefit from any Income Tax exemption or National Insurance contributions (NICs) disregard.
- Applying to the scheme before the deadline is not sufficient and a new applicant needs to have had the necessary changes made to their salary by the deadline (4 October 2018) in order to benefit from the Income Tax exemption and NICs disregard.
- If you continue to offer a scheme for new entrants after 4 October, you’ll need to deduct Income Tax and NICs on any vouchers given and pay employer NICs after this date.
- Your employees need to tell you in writing (for example, by email) within 90 days if they start getting Tax-Free Childcare, so you can stop giving them vouchers and directly contracted childcare with Income Tax and NICs reliefs. If this means stopping or changing their salary sacrifice arrangement, you’ll need to update their contract and your payroll software. Employees won’t be able to return to your scheme once they’ve left.
Parents reading this post can check out what is available to their family under the new arrangements for child care support at https://www.childcarechoices.gov.uk/