The closure of the workplace childcare voucher scheme: what you need to know

2nd October 2018
Why is the government making this move?

The new scheme is intended to be a fairer and better targeted system than childcare vouchers, and will mean that all families can get support regardless of their employer or whether they are self-employed. Support is based on the number of children in a family, rather than number of parents as seen in the current childcare voucher scheme.

Parents who wish to continue to enjoy the benefits of childcare vouchers must be existing members or have registered and received vouchers prior to the 4 October deadline.

What is employer supported childcare?

Previously known as the childcare voucher scheme, it enables working parents to sacrifice up to £243 per month of their salary in exchange for childcare vouchers. The vouchers can be used as payment for many forms of registered childcare, including breakfast and afterschool clubs, holiday schemes, childminders and day nurseries.

The sacrificed amount is exempt from tax and National Insurance contributions and can result in savings of up to £933 per year, per parent (£1,866 per household). Employers are also exempt from NICs on the amount sacrificed by each employee, reducing their payroll costs.

Many working parents, however, are ineligible for childcare vouchers because their employers do not support the scheme. In contrast, the new tax-free childcare scheme is open to all working parents, including those that are self-employed, provided they meet the other eligibility requirements.

What is new tax-free childcare scheme?

Arising from the Childcare Payments Act 2014, tax-free childcare first became available in April 2017 and is a ‘matching’ scheme allowing eligible working parents to claim a maximum amount of £2,000 per child towards the cost of registered childcare.

However, to receive it, families must also contribute to the cost. Eligible families are required to deposit funds into a dedicated online account. For every 80p deposited the government will match it with a 20p contribution, and when the £2,000 limit is reached the government will stop matching the transfer made by the family.

Only parents with a child under the age of 12, or under the age of 16 if disabled, are eligible for scheme. The maximum income for the tax-free childcare scheme is £100,000 per parent, whereas childcare vouchers do not have an income limit (although they are reduced according to tax band).

What happens to existing scheme members?

To be recognised as an existing scheme member, parents must have had vouchers credited into their account before the deadline. This may mean – depending on the employer’s payroll cycle – that September is the last payroll in which new members can receive the vouchers, so it is imperative that employees check which deadline will apply to them.

Existing scheme members can continue to enjoy the savings via the vouchers for as long as they remain with their current employer and their employer continues to offer the scheme.

If a parent’s employment circumstances change by way of TUPE transfer, they are still entitled to join the scheme under their new employer.

However, if there is a complete change in employment through the parents own choice, they will no longer be entitled to the vouchers as an ‘existing scheme member’ and under the new rules they will not be allowed to join their new employer’s scheme.

If the employer decides to discontinue the scheme, each working parent who was previously entitled to join would need to enrol in the tax-free childcare scheme.

What to do next?

If you are already signed up to the childcare voucher scheme you don’t need to do anything and can continue claiming them until you change jobs.

If the tax-free childcare scheme works best for you, you will need to apply for the scheme via the government Childcare Choices website. You will need to give written notice to your employer that you want to permanently leave the voucher scheme to sign up to the tax-free scheme.

If you are not signed up to anything and the childcare voucher scheme works best for you, you will need to act quickly as the deadline is looming.

Check with your employer if it runs a childcare voucher scheme (speak to your HR or personnel department to check this).

Note that if you are self-employed or a sole trader you will not be eligible for the childcare vouchers and you must have received your first voucher by 11.59pm on the 4 October to qualify as an existing member. Many employers will require a month’s notice to start the deductions from your payslip, so contact your payroll department ASAP to get the ball rolling.

If your employer doesn’t offer a scheme then simply sign up to the new tax-free childcare scheme.

Disclaimer: This information is for general guidance regarding rights and responsibilities and is not formal legal advice as no lawyer-client relationship has been created.

Taking your children out of school during term time could land you in detention

Molly-Ellen Turecek from DAS Law explains the circumstances that permit an absence during term time and the penalties parents can face if they are found not to have complied with the law.

September 2021 Learn more
New school year brings new clashes over school uniforms

Strict school uniform rules have angered parents who believe their children should be allowed some flexibility when it comes to uniforms. But where does the law stand and what can parents do if they disagree with school rules?

August 2021 Learn more
Children’s parties – when merriment turns to misery

What happens if things go wrong and someone is injured at a party? Are parents and guardians legally responsible for making sure the venue is safe?

June 2018 Learn more

Read more from the DAS Law blog

General advice , Property disputes Everybody needs good neighbours. But what can be done if someone refuses to be neighbourly?

What happens when a neighbour’s plant is growing across onto your property? And what can be done if a neighbour’s tree is blocking the light into your garden?

May 2021
General advice , Protecting your business 5 things you need to know about missing the 31 January self-assessment deadline

With 31 January deadline fast approaching, there are just ten days left for the UK’s 5.4m taxpayers to submit their Self-Assessment tax returnss. What can you do if you miss the deadline?

January 2021
General advice , Employment disputes Beware the perils of sharing colleagues’ virtual Christmas party antics on social media

Just because the party is being held online, it should still be treated as an extension of the workplace with both employers and employees conducting themselves appropriately.

December 2020
General advice NHS Covid-19 Test and Trace App: What happens to our personal data?

Legal adviser Chloe Williams explains how much we know about how the app works and what happens to the personal information we share.

November 2020
General advice University tuition fees and accommodation costs in a Covid-19 world

Universities have switched to online lectures and some campuses are imposing strict social distancing measures – what rights do students have?

September 2020
Road traffic accidents , General advice What the new rules have to say if you are planning to ride your own e-scooter

E-scooters may have become commonplace on our streets over the last few years but technically they are illegal…that is until now, sort of. But what do owners and riders need to know?

July 2020
General advice , Motorcycling What you should know about cycling laws

Where does the law stand on helmets, safety cameras and cycling offences? Chloe Williams, Legal Adviser from DAS Law, has the answers.

June 2020
General advice The law and the right to peaceful protest

The right to peaceful protest in the UK is expressly guaranteed under European Convention of Human Rights (ECHR). But how does that translate into our law? What is the current UK law on protesting?

June 2020
General advice , Motorcycling What you need to know about seat belts and car seats

What is the current law on wearing seatbelts? DAS Law’s Molly-Ellen Turecek explains.

February 2020
General advice , Property disputes Ho-ho-home invasion: is Father Christmas trespassing?

When he enters your home, is Father Christmas actually trespassing? If he does so without your expressed permission, could he be prosecuted?

December 2019
General advice , Protecting your business , Commercial disputes Understanding the definition of defamation

Defamation can be a complex area of the law but this simple guide from DAS Law’s Damien Field will hopefully help you to understand it a little more clearly.

November 2019
General advice , Protecting your business , Commercial disputes Libel and slander – the distinction in defamation

Defamation is the expression of an untrue insinuation against a person’s reputation. But what is the current law on defamation? DAS Law’s Saiful Ahmed explains.

November 2019
General advice What the law says on poppies and Remembrance Day

Can your boss stop you from wearing a poppy at work? Alexandra Owen, senior associate at DAS Law, tells employers and employees what they need to know.

November 2019