How does the Spring Statement affect employers with employees using Childcare Vouchers?
The rise in the National Insurance rate, taking effect from April 2022, while increasing the rate of both employees and employers National Insurance Contributions also has the effect of increasing the savings that employers will make through eligible employees using the Childcare Voucher scheme.
From April 2022 the rate of employers National Insurance Contributions increases from 13.8% to 15.05%. Childcare Vouchers allow eligible employees to sacrifice up to £243 per month of their salary, tax and National Insurance exempt, to pay their childcare costs for children under 16 (17 for children with disabilities). This change therefore increases the maximum savings amount for employers from £402 to £438 per year, per employee.
The Chancellor also announced that from July 2022 the threshold at which employees start paying National Insurance will rise to £12,570. There has not been an equivalent rise in the threshold at which employers start to pay National Insurance therefore there will be no additional saving for employers at that time. While this could mean an overall saving for employees, those employees currently using Childcare Vouchers and who are earning £15,486 or less may see a reduction in their Childcare Voucher savings as some or all of their earnings will no longer be liable for National Insurance contributions.
The Childcare Voucher scheme closed to new entrants in October 2018 and is only accessible to those employees who were in the scheme with their current employer before that date and provided they make at least one salary sacrifice in every 52 week period and do not change employer. Employees must be earning more than the National Living Wage in order to make a salary sacrifice into Childcare Vouchers.
For more information on Childcare Vouchers refer to our website, or contact our Family Benefits Advice Service, who can further explain how the changes will affect both employers and their employees. Freephone 0800 028 3008 or email firstname.lastname@example.org for free, impartial and confidential advice.