This week we take a look at childcare changes and what employers need to do when the upcoming changes take effect.
The childcare voucher scheme will close to new applicants on 4 October 2018. However, if an employee has joined a scheme and received their first voucher before this date then they will be able to continue receiving vouchers. For those who have not joined a voucher scheme the government has launched a Tax-Free Childcare scheme to help working parents manage the costs of childcare and allow them to work more hours.
What is Tax-Free Childcare?
The government will give £2 for every £8 put into a childcare account by a parent. Parents can receive up to £2,000 per child per year to help them pay for regulated childcare or up to £4,000 for disabled children.
If a parent or their partner is in receipt of Working Tax Credit, Child Tax Credit, Universal Tax Credit or Childcare Vouchers then they will not be able to get Tax-Free Childcare. If a parent gets 30 hours free childcare without Tax-Free Childcare then they can continue to get Working Tax Credit, Child Tax Credit, Universal Tax Credit or childcare vouchers.
Upon successful application for Tax-Free Childcare:
- Child Tax Credit or Working Tax Credit will automatically stop immediately
- Childcare vouchers can continue for up to 90 days
Before cancelling their Universal Credit Claim parents need to successfully apply for Tax-Free Childcare.
When can parents still receive Childcare Vouchers?
If an employee has joined a scheme and will receive their first voucher before 4 October, then they can continue to receive vouchers if they:
- Stay working with the same employer who continues to run the scheme
- Do not have a break in receiving vouchers for one year or more such as if they were to take an unpaid career break.
After 4 October an employee could move with their work under a business transfer covered by the Transfer of Undertakings rules and still remain under the same terms and conditions. If this occurs the employee could join an existing childcare voucher scheme from their new employer or the employer can start a new scheme if they do not already have one.
What do employers need to do?
It is an employee’s responsibility to tell you in writing (by email) within 90 days if they are receiving Tax-Free Childcare so that you can stop giving them Childcare Vouchers. This may mean stopping or changing a salary sacrifice arrangement meaning that you must also update the employees contract and your payroll details. Once an employee notifies you they will be receiving Tax-Free Childcare, they will not be able to re-join your voucher scheme at any point. The employee can still use any vouchers they may already have.
As an employer you are also able to make contributions to the employee’s childcare account if you wish by using a bank transfer or setting up a standing order. If you do choose to make payments to the childcare account, then you should do this after the deduction of any Tax and National Insurance contributions due.
The government has developed a toolkit for employers to help inform and promote Tax-Free Childcare to employee’s which you can view here: https://www.childcarechoices.gov.uk/communications-toolkit/
If you would like any further information regarding Tax-free Childcare or any other schemes for employee’s then please contact us for more details.
