Information about the new tax-free childcare scheme from Autumn 2015
The Government has announced that from autumn 2015 there will be a new benefit scheme to help with childcare costs to replace the current childcare voucher scheme.
Allsave positively welcomes the government’s arrangements to support working families as affordable childcare is a must in the current economic climate. With childcare costs rising and the demand for childcare increasing, plans for a simple and wide reaching scheme has never been so vital to help working parents pay for their childcare costs.
As a member of the CVPA (Childcare Voucher Providers Association) Allsave will be at the forefront liaising with HMRC regarding the setup of the new scheme and ensuring a smooth transition for those employees who wish to switch to the new scheme.
The new scheme, which will eventually replace childcare vouchers, will only be available for families where either both parents or a single parent works. Earnings per parent must be less than £150,000 for each parent per year. Work in this case means that each parent must work at least 16 hours a week and the scheme will, for the first time, be open to the self-employed.
It will not be available to families that receive support through tax credits or Universal Credit (which will be introduced in the next two years to replace tax credits), as instead parents can get up to 70% of childcare costs paid by the government.
The new scheme will allow parents to receive up to £1,200 a year for each child which will work out as up to 20% of their childcare costs. In the first year, all children under 5 will be eligible, with the age range eventually including all children under 12.
What happens to the existing childcare voucher scheme?
For those parents, who are a member of the childcare voucher scheme in the autumn of 2015, they can continue to receive childcare vouchers or they can switch to the new scheme if preferred, however entry to the childcare voucher scheme will be not be permitted for any new members. Nearer the time Allsave will provide the necessary tools to assist parents in deciding whether it is more cost effective to stay in the childcare voucher scheme or switch to the new scheme.
Therefore we recommend that parents join their childcare voucher scheme to make the most of the current tax and NI savings, or if your employer does not have a scheme to encourage them to set one up as it really is a win win situation for both employer and employee.
Now is the time for employers to review their current childcare voucher scheme to ensure that it is simple to use, provides exceptional service levels, is competitive on price, and has a full range of value added benefits, which is exactly what we offer at Allsave.
How will the new scheme work?
Parents will access their online childcare account with a scheme provider and the amounts they contribute to their account will be topped up by the Government. For every 80p contributed by parents, the Government will add an additional 20p to their voucher account. This relief will be capped at a value of £1,200 per child.
The voucher will be able to be used for any registered childcare, Ofsted in England, Care Inspectorate in Scotland, Care and Social Services Inspectorate in Wales and Department of Health, Social Services and Public Safety in Northern Ireland.
What is the impact of the new scheme on employers?
Parents will join the new scheme directly with the voucher provider. Employers will not receive Employer’s NIC relief for the new scheme, although will be able to continue to benefit from Employer’s NIC relief from the existing childcare voucher scheme, which will continue to run for existing scheme members who wish to continue to remain in the scheme post autumn 2015. In order to encourage parents with children to return to the workplace, Allsave will work with the employers to facilitate their employees’ participation in the new scheme.
Allsave will provide updates as more details become available and will ensure that a smooth transition takes place between the two schemes for all its existing members as well as new clients looking to join our scheme before Autumn 2015.
See the link below – to the HM Treasury Q&A on Tax-free childcare.