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The government is closing the childcare vouchers scheme from the start of April - all you need to know.

Childcare vouchers to close – don’t delay

Working parents can get help with childcare costs – though one option is about to end.

The government is closing the childcare vouchers scheme from the start of April, though existing recipients will be able to carry on getting the vouchers. It’s being replaced by a new tax-free childcare scheme and some parents will be better off with the new system, but not everyone. Which means beating the upcoming deadline even more important.

In fact it might already be too late for some, even though childcare vouchers don’t close until 5 April. That’s because to be eligible you need to have received vouchers before this date – and to do that you need to have had them processed in an earlier payroll. For many this will be in March, but it could well have been in February. So you may only have a few days left to make a decision.

How childcare vouchers work

If your employer has signed up, you may be able to claim vouchers to use on childcare through salary sacrifice if you’re eligible. This essentially means the value of the vouchers are taken from your pay before you get taxed or pay National Insurance Contributions.

So if you were to take the maximum £243 a month, a basic rate taxpayer would normally pay 20% tax on this and then National Insurance. Instead, the full amount goes towards the voucher, meaning you get to save paying tax and NI of almost £78 a month, or £993 a year.

If you’re a higher rate taxpayer the monthly limit is £124, while additional rate taxpayers can use £110 a month towards vouchers.

You’ll see the amount of money you receive each month from your employer drop as a result of how much you sacrifice. The vouchers can then be accessed to pay for Ofsted registered childcare such as childminders, nannies, school clubs, nurseries and more. The maximum age for your kids is the first week in September after your child reaches their 15th birthday, (or 16th if disabled).

What you need to do to see if you can still sign up

Ask your HR team if they offer the vouchers and if it’s too late to sign up. If not find out when the deadline is and get hold of any forms you need to fill in.

If you’ve still time, work out if you’d be better off with this, the new TFC system or the childcare element of Universal Credit or tax credits.

The Gov.UK website has a calculator to help.

The calculator is a handy guide but if you’re getting Universal Credit or have fluctuating childcare costs, you may need to seek extra advice

If it looks like you’ll be better off with vouchers then check that whoever you’d want to use the vouchers with accepts them.

Finally get the form filled in and submitted and make sure your HR team gets it sorted before your firm’s April payroll deadline.

What if it’s too late?

If it’s too late, or your employer doesn’t offer the vouchers, you could still be eligible for the new Tax-Free Childcare payments. Both parents need to be in work unless one of you is eligible for certain benefits or you earn too little or too much to qualify. And it’s only for children under 12 years old (or 16 if disabled). However, anyone can apply – you no longer need to rely on your employer offering the scheme.

This Tax-Free Childcare scheme isn’t salary sacrifice either. Instead you save money for childcare and the government tops up the money you pay into your childcare account by 25%. Remember, though, this top up won’t be on the full cost of your childcare and it is capped.

If you already get childcare vouchers

As long as your employer continues to offer the vouchers, then you’ll be able to keep claiming them.

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