Childcare vouchers and Tax Free Childcare

Childcare vouchers are being phased out in favour of the new Tax Free Childcare scheme:

  • From April 2018 childcare vouchers will be closed to new entrants: if parents are not already signed up for vouchers at that time they will not be able to claim them in the future. 
  • Employees already receiving childcare vouchers at that time can however continue to receive them as long as their employer runs the scheme or until they change employer.
  • Parents can either claim childcare vouchers or Tax Free Childcare – not both. 

It is therefore important, ahead of April 2018, for both employers and employees to consider whether childcare vouchers or Tax Free Childcare are appropriate for them. 

Whether parents are better off with childcare vouchers or TFC will depend on their personal circumstances, including their level of their earnings, their childcare costs and the number of children they have.

Parents will need to look closely at their own circumstances in order to decide which is best for them. 

Parents eligible for Universal Credit or tax credits need to particularly careful when considering childcare vouchers and Tax Free Childcare. Some parents may be better off claiming Tax Free Childcare or Childcare Vouchers instead of tax credits or Universal Credit, but furher personalised advice should be sought.

Parents and employers need to consider whether they would prefer to receive childcare vouchers or receive relief under Tax Free Childcare. If childcare vouchers are preferred, and the employee is not yet part of a scheme, then they need to sign up before April 2018.

For further reference, please contact us or see:

HMRC: Help paying for childcare

What are Childcare Vouchers?

What is Tax Free Childcare?