The closure date for new entrants to childcare voucher schemes has been delayed for six months, with the new deadline set for the 4th October 2018.
Employer backed childcare voucher schemes are offered by many employers as a workplace benefit for their employees, using salary sacrifice to help save parents on their childcare costs. The government had intended to close the voucher schemes to new entrants from 5th April 2018. Employees who had joined the scheme before this date could remain in the schemes, so long as their employer continued to provide them.
To replace childcare vouchers, the government introduced its Tax-Free Childcare scheme in April 2017. This scheme encourages workers to pay money into an online account with the government contributing 20% on top, up to a maximum of £2,000 a year per child. It was initially open to parents who had children under four, before being extended to those with children under 12.
Tax-Free Childcare was intended to replace childcare voucher schemes as the two schemes cannot be used in conjunction, meaning working parents had to choose between remaining on vouchers or switching to the new scheme. There was, however, a number of difficulties and delays when Tax-Free Childcare was initially launched. There are those who also argue Tax-Free Childcare disadvantages those with lower incomes and certain working parents, for example, both parents in a couple will be disqualified from the scheme if one parent earns an annual salary over £100,000.
In response to these concerns, the government has delayed the closure of childcare voucher schemes for new entrants by six months. To make the most of these six months, employers who will continue to offer childcare voucher schemes can:
• Issue a notice informing staff that they can continue entering the scheme until the 4th October;
• Remind staff of the criteria for entry and how this will affect their take-home pay;
• Advise those who were already entered into the childcare voucher scheme that they can choose to remain on this or can decide to change to Tax-Free Childcare;
• Ensure appropriate documentation is completed and stored for those who choose to now enter the scheme.