Tax Efficient Childcare Schemes

Earlier this year the government announced that no new childcare voucher schemes could be set up after 5 October 2018. If employers offering such schemes at 5 October 2018 were prepared to keep administering their scheme then they could continue, but the schemes will eventually be phased out.

The replacement scheme is the government’s “tax free” childcare account which started this year for children up to age 12. Under this scheme the government tops up the savings in the childcare account by 25% up to £2,000 per child per year (£4,000 for a disabled child).

Thus, savings of £8,000 would be topped up by the government to £10,000 and the £10,000 could then be used to pay Ofsted registered childcare providers such as nursery fees, childminders, after school clubs and summer camps.

Unlike childcare vouchers, the new childcare accounts will be available to both employees and the self-employed.

For those already in childcare voucher schemes it may be beneficial to switch to the new childcare account.

Further information can be found here: https://www.gov.uk/tax-free-childcare

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