Changes to the Childcare Vouchers scheme April 2011

Childcare Vouchers are currently tax and NI exempt up to £243 a month for everyone, generating valuable savings for parents and employers.

However, it was decided that those paying higher and additional rates of tax who join the scheme after April 2011 should only be able to make the same tax savings as those paying basic rate tax. In practice, this will be implemented by restricting the amount of tax exempt vouchers that higher and additional rate tax payers will be able to receive.

The changes only apply to parents who join a scheme on or after 6th April 2011 - This means that by joining a scheme now, a parent can save up to £910 a year more!

  

Basic Rate Taxpayer (20% tax *12% NI)  Parents in the scheme before 6th April 2011  Parents who join the scheme after 6th April 2011
Weekly tax exempt amount

 £55

£55

Monthly tax exempt amount

£243

£243

Annual tax exempt amount

£2,916

£2,916

Savings

£933

£933

Employer's NI Savings*

£402

£402

 

Higher Rate Taxpayer (40% tax *2% NI)  Parents in the scheme before 6th April 2011  Parents who join the scheme after 6th April 2011
Weekly tax exempt amount

 £55

£28

Monthly tax exempt amount

£243

£124

Annual tax exempt amount

£2,916

£1,484

Savings

£1,225

£623

Employer's NI Savings*

£402

£205

 

Additional Rate Taxpayer (50% tax *2% NI)  Parents in the scheme before 6th April 2011  Parents who join the scheme after 6th April 2011
Weekly tax exempt amount

 £55

£22

Monthly tax exempt amount

£243

£97

Annual tax exempt amount

£2,916

£1,166

Savings

£1,516

£606

Employer's NI Savings*

£402

£161

* new NI rate applicable from April 2011


So if you are an employer who has not yet got a scheme in place, if you implement a scheme prior to April 2011, any of your eligible employees paying higher or additional rate of tax can join the scheme now and will be able to continue to receive £55 a week tax and NI exempt indefinitely (or until they no longer require childcare vouchers), thus by introducing the scheme prior to April 2011, you will enable your employees to make the maximum savings.


Detailed questions and answers for employers and employees have been produced by HMRC.

http://www.hmrc.gov.uk/thelibrary/esc-qa.htm



Did you know?

Edenred created the UK's first childcare voucher scheme in 1989 and were part of the original lobbying group which pushed for National Insurance and Tax exemptions on childcare vouchers.

To find out more about our Childcare Voucher scheme contact us