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Childcare Vouchers
Issue 34 - February 2010
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Childcare vouchers are a method for parents to pay for childcare facilities using salary sacrifice...
What are Childcare Vouchers?
The term ‘salary sacrifice’ refers to the situation whereby an employee opts to sacrifice part of their salary in return for child care vouchers. They therefore receive a lower level of salary in addition to the child care vouchers. The amount of salary sacrificed reduces the individual’s contractual pay.
In addition to the savings made by the employee, there is the added benefit to the company, as they too will save money on tax and national insurance contributions, whilst the vouchers are seen as an additional incentive that can be offered to employees.
Are changes planned to childcare voucher schemes?
The Government recently announced that they were planning to scrap tax and national insurance relief on childcare vouchers by 2011. This would leave thousands of parents out of pocket as they would no longer receive the tax and national insurance savings they had previously enjoyed.
There has been fierce opposition in relation to the Government’s plans to scrap the tax and national insurance relief which has caused the Government to completely re-think their proposal.
Are there any new proposals in place?
Instead of scrapping tax relief on childcare vouchers completely, tax relief will now be restricted to the standard income tax rate of 20%. The new proposals will therefore affect those who pay a higher rate of tax, whereas those who currently pay basic rate tax will remain unaffected by the changes.
Will the proposals affect employees already receiving vouchers?
Any employees who currently receive childcare vouchers will remain unaffected by the proposal as the changes will only apply to new entrants to childcare voucher schemes from 2011.
Will there be any further changes?
The Government has yet to announce their plans on relief in relation to national insurance contributions. In addition to this, it is not yet known how parents will be affected if they decide to change roles after the proposals are implemented in 2011.
Further Information
Further information in respect of childcare vouchers will be provided in future editions of this newsletter. In the meantime, further advice can be obtained from your HR Department.
For NorthgateArinso clients, please contact the NorthgateArinso HR Advice Line on 0845 299 0243 who will be happy to help with any queries in respect of childcare vouchers.
What are Childcare Vouchers?
The term ‘salary sacrifice’ refers to the situation whereby an employee opts to sacrifice part of their salary in return for child care vouchers. They therefore receive a lower level of salary in addition to the child care vouchers. The amount of salary sacrificed reduces the individual’s contractual pay.
In addition to the savings made by the employee, there is the added benefit to the company, as they too will save money on tax and national insurance contributions, whilst the vouchers are seen as an additional incentive that can be offered to employees.
Are changes planned to childcare voucher schemes?
The Government recently announced that they were planning to scrap tax and national insurance relief on childcare vouchers by 2011. This would leave thousands of parents out of pocket as they would no longer receive the tax and national insurance savings they had previously enjoyed.
There has been fierce opposition in relation to the Government’s plans to scrap the tax and national insurance relief which has caused the Government to completely re-think their proposal.
Are there any new proposals in place?
Instead of scrapping tax relief on childcare vouchers completely, tax relief will now be restricted to the standard income tax rate of 20%. The new proposals will therefore affect those who pay a higher rate of tax, whereas those who currently pay basic rate tax will remain unaffected by the changes.
Will the proposals affect employees already receiving vouchers?
Any employees who currently receive childcare vouchers will remain unaffected by the proposal as the changes will only apply to new entrants to childcare voucher schemes from 2011.
Will there be any further changes?
The Government has yet to announce their plans on relief in relation to national insurance contributions. In addition to this, it is not yet known how parents will be affected if they decide to change roles after the proposals are implemented in 2011.
Further Information
Further information in respect of childcare vouchers will be provided in future editions of this newsletter. In the meantime, further advice can be obtained from your HR Department.
For NorthgateArinso clients, please contact the NorthgateArinso HR Advice Line on 0845 299 0243 who will be happy to help with any queries in respect of childcare vouchers.