Childcare Vouchers to End April 2018 – Everything you Need to Know

childcare vouchers endingFor millions of parents across the country who pay for childcare, using the Government backed childcare vouchers helps them to save around a thousand pounds a year. It’s an invaluable scheme which allows parents to pay for childcare from their pre-tax salary, effectively offering tax-free childcare.

That might not sound like a lot, but too many parents struggling to in the harsh economic climate; it’s proven to be essential.

Now, in a move intended to simplify and streamline tax-free childcare for citizens, the Government have announced that applications for childcare vouchers will close in April 2018, to be replaced by the Tax-Free Childcare scheme, which is due to begin rollout in April 2017.

Understandably, that’s a worry to parents who aren’t fully aware of what the new scheme will offer them in comparison to the exciting childcare vouchers, or for BookingLive customers who aren’t sure whether to disable childcare voucher support in their system.

In this guide, we’re going to explain everything you need to know in terms of the childcare vouchers change.

 

How does the current system work?

The current childcare vouchers scheme is available for parents with children up to the age 15, and is offered through employers. The vast majority of employers offer childcare vouchers through ‘salary sacrifice’, which works thusly: you might give up £1,000 of salary, but after tax and your National Insurance contribution, it would only be £700. In return, you’d get £1,000 worth of vouchers to spend on childcare, making you £300 better off than you would be if you’d simply taken your salary.

Basic rate taxpayers can pay for up to £243 worth of childcare vouchers each month, working out at £55 per week. It’s crucial to note that this figure is per parent, so two working parents can get £468 worth of vouchers each month.

The childcare voucher scheme will close to new applicants in April 2018.

 

How will Tax-Free Childcare work?

The new Tax-Free Childcare scheme was unveiled during budget week, March 2014, and was always explicitly designed to replace the childcare voucher scheme, although the specific rollout and cut-off dates have since changed.

Tax-Free Childcare is once again intended to help parents with the cost of childcare, though it goes about it in a different way. Launching in April 2017, parents who opt in to the scheme will give eligible families an extra 20% towards their childcare costs.

Even at such a late stage, we still don’t know the exact details of how the Tax-Free Childcare system will work. However, we do know that for every 80p you put in, the state will add 20p, effectively giving you a basic-rate tax back on what you pay.

In total, you’ll be able to pay for childcare of up to £10,000 per child per year, so you could get up to £2,000 per year (or £4,000 if your child is disabled) every year.

 

How will this affect BookingLive customers?

In October 2015, BookingLive introduced a way for childcare providers like schools, nurseries and after school clubs to accept childcare vouchers as a form of payment for their customers who chose to book online.

This has been a huge success and a massive boon to our customers working in childcare sectors, but what does the move to Tax-Free Childcare mean for those booking platforms? You will still be able to accept Childcare vouchers – it just may mean that it won’t be an as popular payment method as it once was.

We’re also yet to hear how childcare credits are managed beyond that date for families with unspent credits to their name. At the moment, you can apply to your place of work to have the credits turned back into taxable income, but it’s unclear exactly what the cut-off date for these conversions will be.

Our development team are always looking to adapt the platform to fit in with current needs and expectations. We do know, however, that childcare tax credits will be in operation until April 2018, so retaining the ability to pay via these methods is highly recommended until this date.

We’ll update this article as and when new information regarding childcare vouchers and Tax-Free Childcare is announced.