Business News

Back To School – Childcare Vouchers or Tax-Free Childcare Account?

There continues to be poor take-up of the Government’s Tax-Free Childcare Accounts which provide a 25% subsidy towards the cost of childcare.

The system operates by topping up savings of up to £8,000 per child by 25%, potentially an extra £2,000 from the Government to spend on qualifying childcare. The scheme applies to children under 12 and the account can be used to pay nursery fees, breakfast clubs, after school clubs and registered childminders. In contrast childcare vouchers may be used to pay for childcare up to age 16. Despite the PAYE and NIC advantages not all employers provided childcare vouchers.

Tax free childcare accounts are available to both employees and the self-employed. To be eligible the parent generally needs to be working and earning at least the National Minimum Wage or Living Wage for 16 hours a week on average. For a 3 months period they need to earn at least £1,976 and they are not eligible if their adjusted net income is more than £100,000 a year.