Childcare vouchers

19 November 2019

As many working parents will agree, the cost of childcare is high. Thankfully, there are initiatives in place to help employees manage these costs.

In this guide, we explore what they are and how your business can go about helping working parents find a better work-life balance.

What are childcare vouchers?

It was an initiative by the UK government to help parents in employment. It helped them to benefit from tax efficiencies so they could save money.

Prior to October 2018, you were able to offer staff assistance through the government childcare vouchers salary sacrifice initiative.

This would allow staff to earn up to £55 per month in tax-free vouchers that they could then use to cover the cost of care.

However, since 4th October 2018 you can only provide this benefit to eligible staff who signed up to the childcare voucher scheme prior to the cut-off date.

Any new applicants from this date onwards have only been eligible for the government-led programme.

How do childcare vouchers work?

The government childcare vouchers require no involvement from employers as employees coordinate the process. 

This scheme asks individuals to deposit funds into an account on the HM Revenue and Customs website, which the government will then match with tax-free contributions up to a total of £2,000 per child, per year.

The motivation behind this scheme was to ensure all working parents received a guaranteed amount of childcare support, as opposed to the employer-led scheme, which wasn’t offered by all organisations.

What can childcare vouchers be used for?

Employees can use these funds to pay for approved initiatives. These include:

  • Childminders, nurseries, and nannies.
  • After school clubs and play schemes.
  • Home care agencies.

Staff must make sure their childcare provider signs up to the scheme before they can pay them and benefit from tax-free childcare.

Work childcare vouchers eligibility

Access to the government’s tax-free childcare scheme depends on a number of criteria including:

  • An applicant’s working hours and pay.
  • Their partner’s working hours any pay (if applicable).
  • The child’s age and disability status.

The government provides an online childcare vouchers calculator to help employees determine whether they qualify for this tax-free entitlement.

Looking for more advice?

For further information about your employees’ rights regarding childcare, you can call us for immediate help: 0800 028 2420.

Suggested Resources