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Press Release: LITRG welcomes extension of childcare voucher scheme

Published on 16 March 2018

The Low Incomes Tax Reform Group (LITRG) has welcomed the Government announcement during a House of Commons debate that the tax and National Insurance relief offered through childcare vouchers would remain available to new applicants for a further six months.

The Government had previously announced in the 2016 Budget that it intended to close childcare vouchers for brand new applicants from 6 April 2018, with the new Tax-Free Childcare (TFC) scheme providing help with childcare costs instead. The latest announcement means that this date has been moved to October 2018.

LITRG Chair Anne Fairpo said:

“We welcome the Government’s decision to allow new applicants to claim childcare vouchers until October 2018.

“Although TFC will eventually replace the tax and national insurance relief associated with childcare vouchers, the rules for the TFC scheme are different. While some people will be better off under the TFC scheme others will benefit more from childcare vouchers. Individuals need to check their own position carefully because whether they qualify for either scheme and how much help they can get depends on a number of factors including hours worked, income, number of children and the amount of childcare costs.

“Unfortunately, it can be difficult for people to work out which childcare scheme is best for them. Alongside childcare vouchers and TFC, childcare help is also provided through the tax credit and universal credit systems. In some cases, making an application for one scheme can end financial support under another and so people must ensure they check their position carefully before making any applications.

“The Childcare Choices website offers a calculator to help people make these choices, however it does not include universal credit and it may not give accurate answers for those with more complex circumstances such as variable childcare costs. We advise people to contact a local advice agency for help to make sure they make the best decision based on their own circumstances.

“While the extension is welcome for those who benefit more from the current childcare voucher arrangements, it does mean that people will have another scheme to consider when deciding which government childcare support option is best for them. It is therefore crucial that government provides additional support to people, ideally through a telephone service who can cover all of the relevant schemes, to help them with these difficult decisions and that further improvements are made to the childcare calculator.”

Although this article relates to childcare vouchers, similar rules apply to directly-contracted childcare provided by employers which will also be replaced by the TFC scheme. Workplace nurseries are not affected by the introduction of TFC. It is not yet clear whether the six month extension applies to directly-contracted childcare as well as childcare vouchers. The exact date in October has not yet been announced.

Broadly speaking, we understand that existing members of a scheme, those who are provided with a voucher in one of the 52 tax weeks leading up to the relevant October date, can continue benefiting from the tax and NI relief after that date as long as their employer continues to offer the scheme.

See our recent submission to the Treasury Select Committee on childcare and the complexity of interactions between the various childcare schemes.


Contact: Victoria Todd (please use form at Contact Us) or follow us on Twitter: @LITRGNews

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