HR needs to ensure parents sign up for childcare vouchers before April 6th’s tax exemption rates changes. The difference between signing up before and after April 6 will mean some parents losing out on hundreds of pounds in tax savings.
Currently, all employees using childcare vouchers are eligible for the full allowance of £55 per week. When the tax rules change, the system primarily benefits basic rate tax payers, while higher rate tax payers and additional rate tax payers will be restricted to £28 and £22 per week respectively. In reality, this means some parents will lose out on hundreds of pounds a year on tax savings.
Childcare vouchers are free to employers and can save them significant sums in National Insurance Contributions. After the changes, employers will need to assess staff earnings to determine the amount of vouchers a parent can take.
Parents who are not currently on the scheme, but suspect they may use childcare in the future, can also join the scheme now in order to secure the higher level of savings. Research from the Day Care Trust shows 25 hours of nursery care a week for a child under 2 equalled a yearly average of £5032 in England, £5220 in Scotland and £4723 in Wales. In London, this rises to £6164.
The vouchers can be used for children up to the age of 15 – including nannies, childminders , out of hours school clubs, summer camps, nurseries and the care element of boarding school fees; so any form of registered, formal childcare. Lorica partners with Sodexo for childcare vouchers. Their informative website also details the facts – www.april2011.co.uk.
Matt Duffy, partnerships manager at Lorica, said, “Parents need to get in on this now. It’s their last chance to take full advantage of the scheme. Even if they don’t have an immediate requirement, vouchers have a 12-18 month life with most providers. Locking into a commitment now will ensure they will be able to use the benefit to maximum levels.
“If an employer hasn’t got a child voucher scheme already, they should put one in place. It works as one of the most popular form of benefits and comes free of charge to employer and employee. From a duty of care, employers should be communicating the changes so they are able to work with the changes as soon as possible.”