Continue to save up to £1,866 on the cost of childcare each year
The Childcare Voucher scheme allows working parents the opportunity to sacrifice part of their pre-tax salary to pay for registered childcare. As a result, they make savings on their Tax and National Insurance – up to £933 per parent, per year.
How does the scheme work?
Childcare Vouchers are operated through salary sacrifice. A salary sacrifice arrangement is an agreement to reduce an employee’s entitlement to cash pay, usually in return for a non-cash benefit.
Under the Childcare Voucher scheme employees may ‘sacrifice’ part of their pay in exchange for Childcare Vouchers, to save money on tax and National Insurance Contributions. To avail of these savings employees can only use Childcare Vouchers to pay for registered childcare.
Each eligible parent can sacrifice a maximum of £243 per month from their salary into their Childcare Voucher account.
Anyone who is currently signed up the Childcare Voucher scheme through their employer, and who has made at least one salary sacrifice payment into their account in the previous 52 weeks, can continue to use Childcare Vouchers to help them to pay for their childcare, for as long as they are eligible. However, the Government closed the Childcare Voucher scheme to new entrants in October 2018, so it is not now possible to join the scheme.
To remain eligible parents must:
- Stay with the same employer
- Make at least one payment into their account every 52 weeks (more than £0)
- Not leave the Childcare Voucher scheme to join Tax-Free Childcare.
If an employee wants to make changes to their sacrifice arrangement, their contract of employment must be altered with each change. An employee’s contract must be clear on what their cash and non-cash entitlements are at any given time.
If an employee’s circumstances change for a short time, for example due to a period of maternity leave when they are not using childcare, parents may have the option to temporarily pause their salary sacrifice or to reduce the amount they pay into their Childcare Voucher account through their employer (this is at the employer’s discretion, and represents a change of contract). Payments can be reduced to as little as £1 and we would advise parents, if possible, to continue to make a small payment (even £1 per month) into their account, to allow them to retain their eligibility for the scheme and increase their contributions again in the future.
Parents should submit their request to change their salary sacrifice amount to their employer using their online Childcare Voucher account, eVouchers. Individual employers may have rules around how often they permit changes and will have a ‘cut-off date’ by which these requests need to be received, so changes may not be actioned immediately. You can discuss this with your employer.
For more information on how the Childcare Voucher scheme operates, you can download our Employee Guide to Salary Sacrifice and our Employee Terms and Conditions guides here.
If you have any questions about childcare, childcare costs and the best form of support available to you now that Childcare Vouchers are no longer open to new entrants you can call our Family Benefits Advice Service on 0800 028 3008 or email email@example.com.
Useful information on Childcare Vouchers
Chris Briggs from Employers For Childcare's Family Benefits Advice Service explains how both employers and their employees can maximise the financial savings they make through the Childcare Voucher scheme by 'backdating'. Chris explains the rules around backdating and signposts to where employers and parents can access further information.
Chris Briggs from Employers For Childcare's Family Benefits Advice Service explains the eligibility rules for Childcare Vouchers, since the scheme closed to new entrants in October 2018. No new parents can now join the Childcare Voucher scheme, but those using it can continue to do so, while they remain eligible.