The scheme, in which companies can provide up to £55 per week of employee wages as vouchers to assist in childcare, is due to close on 4 October 2018.
Popular with new parents, this ‘family friendly’ scheme currently operates as an optional, free to join initiative that companies can introduce at their discretion. It works by taking a small sum from an employee’s wage and providing it in voucher form, free from tax and National Insurance contributions. As such, the scheme is designed to offer monetary aid to employees that assists them with childcare costs. Currently, eligible employees need to have parental responsibility for a child under the age of 15, or 16 if the child is disabled.
On October 4, the voucher scheme is to be replaced by government backed Tax-Free Childcare. Introduced amid calls for the government to do more to assist parents in childcare costs, this new initiative offers parents the chance to claim tax-free payments directly from the government of up to £2,000 per annum. It works by requiring parents to open an online account on the HMRC website, into which the parent deposits money and the government will top up this amount, up to £2,000 per child each year. Employees will no longer be able to join up to receive childcare vouchers from this date and will only have the new scheme available for childcare cost assistance.
If a company is currently running the old voucher scheme they will be able to continue to provide this, as long as all applications were processed and confirmed before the upcoming closure date. Furthermore, if an employee who has been on the voucher scheme decides they wish to switch to Tax-Free Childcare, they will no longer be entitled to receive any additional vouchers from their employers. Therefore, the employee must inform their manager if they do intend to start using the new initiative.
Organisations should be prepared to answer any questions that employees may have surrounding this. Whichever scheme would ultimately be the best option for the employee would depend upon their specific circumstances. They should be encouraged seek further guidance on this issue before making a decision. There is no deadline for the swap however an employee will be unable to receive childcare vouchers again if they do decide to leave the scheme.