Changes to childcare vouchers scheme: don't lose out


Childcare vouchers logoCalling all Mumsnetters who are higher rate taxpayers. Are you intending to use childcare vouchers at some point in the next few years? 

If you are - quick, quick, quick! Changes to the childcare vouchers scheme come into force on 6 April 2011, which will see the allowances plummet for higher rate taxpayers. 

But if you join the childcare voucher scheme now (or at any point up until 5 April 2011) you'll continue to get the current voucher allowance.

If you're a basic rate taxpayer, you'll benefit from the new allowance.

MoneySavingExpert has a handy synopsis of winners and losers (which we're cribbing, so thanks to them):

Current situation (per parent):

  • Basic (20%) taxpayer - maximum annual gain £890
  • Higher (40%) taxpayer - maximum annual gain £1,170
  • Top (50%) taxpayer - maximum annual gain £1,460

New joiners after 6 April 2011 (per parent):

  • Basic (20%) taxpayer - maximum annual gain £920
  • Higher (40%) taxpayer - maximum annual gain £610
  • Top (50%) taxpayer - maximum annual gain £590 

What are childcare vouchers and how do they work?

Essentially, they're a salary sacrifice that saves you money because they're paid for out of your pre-tax and NI income.

After tax and NI, £1,000 of salary would leave basic rate tax payers with roughly £700. But for £1,000 of salary, you get £1,000 of childcare vouchers.

If you'd like to do the maths properly, here are some handy calculators

Childcare vouchers are only available via employers and you can only claim for children aged up to 15. You and your partner (if you have one) can claim individually. 

But be aware that if your family income is less than £42,000 a year, getting childcare vouchers reduces your eligibility for tax credits. So work out how much you could be eligible for from tax credits before you decide about childcare vouchers.

Last updated: about 3 years ago