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Tax-free Childcare is the latest initiative from Government to support working parents, but it could see some worse off than in the childcare voucher scheme it is designed to replace. James Malia from Sodexo Benefits and Rewards Services looks at where the new scheme fits in and how HR can support parents to get the best deal.
The Government rolled out its new Tax-free Childcare scheme in late April in an effort to show greater support for working parents.
As part of the launch, the Government announced that children up to the age of four, rather than the expected age of two, will initially be eligible to participate. As a result, the scheme is now open to more families than originally expected.
Tax-free Childcare has been a long time coming, and additional help with childcare is welcome news for working parents.
However, HR departments across the country will need to familiarise themselves with the details of the new regime – and compare the government’s scheme with the childcare vouchers that are currently on offer – in order to ensure that their employees are getting the best deal possible.
Understanding the options
Since 2005, employers have provided parents with childcare vouchers as part of a salary-sacrifice scheme.
These vouchers currently help around 780,000 working parents save up to £933 of tax and national insurance on their childcare costs per year.
From April 2018, new entrants to the childcare vouchers scheme will not be permitted. Parents already in the scheme will, however, be able to remain in the scheme for as long as they require.
However, because more than one parent can sign up to the scheme, savings can actually be as high as £1,866 per family per year.