Should the government make all childcare payments tax-free?

[WhatTheWhat]

As in - should they change the rules so you can pay for childcare from your gross salary, rather than after tax. The childcare vouchers schemes work like that, but the amounts you can take are ridiculously low (less than £150 per month under the new rules).
Most childcare providers will then pay tax themselves on the payments they receive, so there's taxation in the cascade - it just helps working parents pay for their children's care more easily.
What do you think?

Yes I think they should.

Child care costs are crippling. The Government are so out of touch that they fail to realise that even couples on good incomes are plunged into poverty when they have pre school children.

The other problem with the childcare vouchers is the way that the schemes are administered by some employers. We missed out on claiming vouchers this year because the cut off date was too early - the money was going to be taken out of dh's salary before ds started nursery which meant that I wasn't working and we couldn't afford to take the hit on one salary even though we would make savings in the long term.

Next year we have a similar admin problem. The cutoff for dh to claim the vouchers is 31st March, we won't find out if ds has a state nursery place until mid May, if he gets a state place we won't even need the vouchers!

It sometimes feels that everyone is conspiring against us!

What's the new scheme? My husband and I each get £243 of vouchers every month; is this changing? I've not heard...

It's changing if you are a higher rate tax payer in which case it's around £140.

The other thing that annoys me is we get less because dh is a higher rate tax payer and yet if this was being claimed from my salary I would get the full amount. But it can't be claimed from mine because I'm
self employed and my previous employer didn't run the scheme.

Ah, we're not higher rate tax payers so that's why ours isn't changing.

Bonnie - I understand being annoyed that you can't benefit because you're self employed (childcare should be tax deductible, I think) but surely that's nothing to do with your husband? You're taxed as individuals.

Also, I think he should question there being a cut-off date - this seems very wrong. What if you came back to work from maternity leave on April 1st. Could you not claim vouchers for a year?

Childcare should absolutely be 100% tax deductible.

The end.

I really don't know what else to add, it would just make life so much easier if I only had to make one payment to DD's nursery, rather than work out each month how much I've got to pay after the voucher has been deducted from the balance of the invoice. It's so confusing and messy and expensive.

YES.

Bonnie - if you joined the scheme before 5th April 2011 you will still receive the same amount of childcare vouchers even if you are higher rate taxpayer. It's people who joined after who get less.

Mrskpbw - In answer to your last paragraph, you are expected to claim in advance. Therefore you have to have pay for the vouchers when you aren't earning any money. This may not be the case for all employers, dh's employers are not known for their flexibility!

Sydney, yes thats right. We didn't join before as ds was going to be cared for by a relative but that didn't happen in the end. I did say to dh that perhaps we should have paid a minimal amount each month just to get us in the scheme but he saw it as throwing money down the drain. Turns out he was wrong and I was right, as I knew we were likely to end up needing a nursery.

That's rough, Bonnie as you could have saved them up too. Between us it saves DH and I about £2k a year I think. The govt need to do something about this SOON. Would be a very easy way for them to help parents in real terms, encourage people back to work etc. It's a lifesaver for us and we'll probably hold on to them when both LOs are at school as you can store them up and pay for holiday clubs etc.

How annoying Bonnie. It does save a lot. Could your husband question this? It seems very unfair. No point in offering a benefit if you can't benefit from it!

He has questioned it but he works in a huge faceless organisation and they won't change it for anyone!

How much would such an extension to the scheme cost?

As there is no spare money in government, what would you reduce funding for in order to pay for it?

Yes - in virtually all other developed countries childcare is either free or at worst paid for from tax-free income. Childcare inthe UK is some of the most expensive in the world.

QueenEdith - this has a knock-on effect - it is yet another disincentive for people to go out to work - so costing the state lost taxes - plus it has a long-term effect on the children, whose care ought to be one of our primary if not our main focus, but who are instead looked after by parents exhausted from working shifts, who skimp on food, heating etc to ay for childcare - it is a national disgrace. It is a very short-term saving but far more expensive in the long run.

Bonnie, your husband could argue that they are not making the scheme available to all staff - it is unusual for a company to be so inflexible - usually if they have a strict time for joining, they will allow people to join throughout the year if they have a 'lifestyle change' - DS starting nursry would generally qualify.

Also you are not paying for the vouchers as such - salary sacrifice means reducing your salary and receiving a benefit of a corresponding value - if you join the scheme on maternity leave you are not receiving a salary, but your employer has to provide the benefit regardless, so effectively they are paying for it...

about 1/3 of our income goes on childcare. Having that tax free would make a huge difference to our lives.

I wonder if I should send this thread to the Number 10 website?
QueenEdith - obviously I can't possibly know what it would cost to do this as I don't have access to the Treasury metrics, however, I do know that the Government is constantly suggesting new taxes and tax breaks and that the public finances are a moveable feast.
Anything is possible in the macro-economy!
If there's a suggestion that Granny Flats could be exempted from Council Tax, then why not push for tax-free childcare. Or even tax-free childcare up to the national average cost. Or even tax-free childcare, capped at something less ridiculous than £140 or £243 per month!
The rules changed last April and you get up to £243 if you were already in the scheme before last April. If you joined under the new rules, you only get around £140, I believe. Another piece of nonsense from the Treasury that happens to have a disproportionate effect upon women.

definately unfair if still the same arrangement as when we had a nanny. we had to employer her as if we were a company, so paid her 2 sets of NI plus tax, but my husband's company wasn't allowed to pay her as an employee. so we couldn't pay her pre tax. so overall, paid 3 sets of NI and 2 of tax to employ her, which seemed excessive.

I agree with breadandbutterfly.

I just want to know if the government is actually going to start doing the vouchers for the free 15 hrs a week for 2yo's. If they are, then I can go back to work in April 2013, if not then I have to wait till the Easter afterwards, because of when DS3's birthday falls. I need to get back to work, but can't afford the top up for nursery as well as after school care for two other dc.

Yeah, I know TC's pay 70% of it, but when it's for nursery for one dc AND after school care for two, the Maximum £210 a week they pay only actually works out as 55%, and the remaining 45% is actually more than I can earn!

I would be about £5 a week better off than on benefits though, after FSM's, rent, child care and council tax if only I got the 15 hrs free. They don't make it easy for NMW workers to go back to work, do they, with the cost of child care.

dreamingofsun: my DH and I would pay income tax and NI on our income, then we would pay employer's NI, plus employee's NI and income tax on the nanny's salary (or the nanny would pay the latter two, if you look at it that way).
So from every £1 we earn and pay on to our nanny, there's 3xNI and 2xincome tax going back to the government.
Of course, if I gave up work in order to do my own childcare, that would be two fewer people in the economy paying any tax at all (me and the nanny).

cardymow (love the name!) it would be brilliant if they did this - I had not even heard about it!

YES

And - hello Gideon. Jolly good idea to run your ideas past the electorate first, bet you wish you'd done that with the pasties now eh?

wahtthewhat - not sure i understand your point? isnt that what i said in my thread?

I digressed a little in my earlier post, and was talking about the Government's idea to extend the free 15hrs a week if child care to 2yo's whose parents are on a low income.

A salary sacrifice scheme is of no use to NMW / very low earners, as they just can't afford to sacrifice ANY of their salary, and if you DO do the salary sacrifice scheme, you can't claim for help from Tax Credits at the same time.

Hence me trying to illustrate that I am hoping that that idea does become a reality sooner rather than later, as it is the only way I can get back to work before April 2014.

Yes, salary sacrifice schemes for child care are a good idea if your combined household income means that you don't qualify for ANY help from Tax Credits, but they are useless for NMW / low income earners. Extending the free 15 hrs child care to 2yo's would enable me, and a lot of lone parents I know, to get back to work a full year earlier than they otherwise would.