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Budget confirms major changes to childcare voucher scheme

21 March 2014 #Employment

It was confirmed in the Chancellor’s budget yesterday that there will be new arrangements for working parents to provide tax benefits to help towards the costs of childcare.

The new online scheme will come into effect from September 2015. It will apply to care for children up to the age of five at first, before extending to children up to the age of 12.

Parents will buy vouchers from the government rather than directly through their employer, which is how the current voucher scheme works. That may have an impact on employers, critics pointing to a loss of national insurance savings for employers.

Children`s minister Elizabeth Truss insists the changes mean 2.5 million families will be able to benefit from childcare vouchers.

The proposed new system will enable all parents earning below £150,000 to take advantage of the scheme, including self-employed who are currently excluded. However, under the new scheme, both parents must be in work. At the moment, according to the BBC, only about 5% of UK employers and 450,000 families are signed up to the present scheme.

The Family Childcare Trust says the average weekly cost for 25 hours of care for a child under the age of two is £109.89.

How the scheme will work

  • Parents paying 80% of childcare costs of up to £10,000 per child to a registered provider will get the remaining 20% tax-free
  • So those whose annual bill is £10,000 would qualify for £2,000 in support
  • Up to 1.9 million families with children under 12 will be eligible in year one

Parents will have to set up an online account, allowing them to get a 20% rebate, per child, on the annual cost of childcare of up to £10,000 a year.

Anyone working part-time and earning more than £50 a week, parents on maternity, paternity and adoption leave and those starting their own business will all qualify.

Clarkslegal, specialist Employment lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Employment matter please contact Clarkslegal's employment team by email at by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.
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