Childcare Vouchers to close to new entrants on 4 October 2018

The Childcare Voucher scheme is due to close to new entrants on 4 October 2018 following a six month extension announced by the government in March. This means parents must have put in place the relevant salary sacrifice arrangements with their employer on or before 4 October i.e. the first payday you receive a reduced salary.

Expectant parents, working families not registered before then, and current users who switch jobs after October, stand to lose out on vital childcare support.

Theresa May has made the support of ordinary working families the foundation of her domestic policy agenda, and for good reason. But the government is at risk of locking millions of these families out of a childcare scheme that is best for them.

The government has a unique opportunity to provide a comprehensive childcare support system that will benefit society as a whole by keeping Childcare Vouchers open indefinitely.

Tax-Free Childcare vs Childcare Vouchers

The new system of Tax-Free Childcare (TFC) provides more financial support to parents that spend more on childcare. These families must be able to spend £8,000 of their own money on childcare each year to get the headline £2,000 of support and often live in more affluent areas. For example, Department for Education data shows the average family in London will receive three times as much support (£905) under TFC as those in the North East (£312).

Childcare Vouchers, however, are a salary sacrifice scheme based on earnings rather than expenditure, meaning those that earn the least can claim the most support. They support families with one parent working, and unlike TFC, can also be used alongside other benefits, including Tax Credits and Universal Credit.

Since the launch of TFC in April 2017, the scheme has experienced significant delays and technical glitches which has prevented parents from accessing vital childcare support. As a result, take-up has been considerably lower than expected with many parents preferring to stay on Childcare Vouchers.

Childcare Vouchers

Tax-Free Childcare

Ordinary working families are more likely to be better off using Childcare Vouchers than TFC. There are several sources to evidence this, including analysis of the DfE’s figures of the average family spend on childcare.

Childcare Vouchers are tapered so that basic rate taxpayers save more than higher rate taxpayers who, in turn, save more than additional rate taxpayers (taper introduced in April 2011).

Lower income families can benefit from accessing Childcare Vouchers alongside other forms of support for working families including Working Tax Credits and Universal Credit.

TFC provides the greatest benefits to those who can afford to spend the most on childcare.

TFC provides the same rate of saving irrespective of income; whether the family is earning £240 per week or £200,000 per annum.

A family using TFC loses eligibility for any other form of support for working families.

If a family’s circumstances change, for example one parent is required to leave work to care for an elderly relative, then they lose their eligibility for TFC.

Campaign to save Childcare Vouchers

The government’s decision to delay the closure of the Childcare Voucher scheme shows the real difference people can make – it was the combined voice of parents contacting their MPs that helped secure the six month extension.

On behalf of working parents, childcare providers, and employers, we are calling on the government to keep Childcare Vouchers open to new entrants, alongside Tax-Free Childcare, as part of a comprehensive and flexible package of childcare support for working families.

We believe all families deserve the choice of the best childcare support that suits their individual family needs. If you do too, find out how you can lobby your MP, or share our campaign materials.

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