Childcare Voucher scheme was a UK Government’s initiative aimed at helping working parents get some relief in their childcare expenses. The scheme however has been discontinued since 4 October 2018. As per Independent.co Parents could claim up to £1,000 a year in exchange for a reduction in salary according to market research firm TNS Global. These vouchers were exempted from tax and national insurance contributions.
Employers would sign for the initiative and take a non-taxable salary sacrifice from members of the staff signing up for the scheme. Companies would then either run the scheme or employ a large number voucher firms to manage the childcare vouchers. The company or the voucher firm would then replace the money with the equivalent childcare vouchers. Parents could setup the amount they require to cover the childcare costs up to £243 per month. As per Voucher provider Accor Services this would save a higher-rate taxpayers as much as £1,195 a year and a basic-rate payer £904.
The vouchers could be used for children up to the age of 15 and for a range of needs, including childminders, nannies, before- and after- school clubs, holiday clubs and day nurseries. As per parliament.uk Parents can take up to £55 a week of their wages as childcare vouchers, on which they do not pay income tax or National Insurance. Although the scheme has been closed for new applicants. The employees who got their 1st voucher before 5 April 2018 (extended by six months) can continue to receive childcare vouchers as long as they stay with the same employer and that employer continues to run the scheme and as long as they do not take an unpaid career break of longer than a year.
History
In 1989, Sue Harvey then Managing Director of Luncheon Vouchers Ltd launched childcare vouchers for its employees. This initiative helped employees to allocate a portion of their wages towards the childcare vouchers which then provided a tax-efficient way to manage childcare expenses.
Economic recession concerns in 2019 forced UK government to consider discontinuing the Childcare Voucher scheme to increase tax revenue. However, after much opposition Gordon Brown then Prime Minister had to abandon its pursuit of discontinuing the scheme. As per publications.parliament.uk On 13 March 2018 Damian Hinds, Secretary of State for Education, told the House
that the Government will “keep the voucher scheme open to new entrants for a further six
months later this scheme will be replaced with Tax-free Childcare Scheme. However, existing members can keep on claiming Childcare vouchers until they changed employers or opted for Tax free Childcare Scheme.
The Childcare Voucher Scheme played a pivotal role in assisting working parents with childcare costs for nearly three decades. Its evolution reflects the UK’s changing economic landscape and policy decisions aimed at balancing support for families with fiscal considerations.