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Maximise your childcare savings

Posted on 13 February 2018

Update: Since this article was originally published the government has extended the deadline to join a Childcare Vouchers scheme to October 2018. The precise date in October is yet to be confirmed by HMRC. All other information provided in this article remains relevant.

 

Maximise your childcare savings with Childcare Vouchers and 30 Hours Free Childcare

Back in September, the government extended its support for 3 & 4 year olds in England from 15 hours to 30 hours of free (or funded) childcare.

  • The new scheme gives you 30 hours of funded childcare per week for 38 weeks of the year – totalling 1,140 hours/year
  • Some childcare providers will allow you to spread these hours across the full 52 weeks
  • Your hours can be used with participating nurseries, playgroups and childminders
  • Your child is eligible from the first term after their 3rd birthday (i.e. 1st September, 1st January or 1st April)

Maximise your savings

To maximise the savings available, combine your 30 hours with the tax and NI savings from Childcare Vouchers to pay for any additional hours you need. Many families would be better off combining these two schemes than if they combined it with Tax-Free Childcare (another new government scheme).

Here’s an example:

Two basic rate taxpayers have a two-year-old in nursery full-time. Currently their childcare costs are £11,100 a year so they would be better off with Tax-Free Childcare (TFC) rather than Childcare Vouchers as they would save £2,000 rather than £1,866.

However, when their son turns three he will be eligible for 30 hours free childcare. This will reduce their bill to £3,200 a year. With TFC they would now only save £640 whereas they could save £1,024 with Childcare Vouchers. So they’ll be better off with Childcare Vouchers.

The government website ‘glitch’

There have been reports that an error on the government’s website is telling parents that they cannot use their 30 free hours in conjunction with Childcare Vouchers. Don’t worry, this is incorrect.

To get around this call HMRC on 0300 123 4097, alternatively, if the error message appears, confirm you are not receiving Childcare Vouchers to proceed, then return to your account later to correct that you are receiving them.

Time is running out – join Childcare Vouchers now to keep your options open

Childcare Vouchers is closing to new joiners from 6th April 2018 and you will need to be in receipt of your first vouchers before this date. Speak to your employer to confirm the final cut-off date for joining in your organisation. Once you’ve joined you can continue to use Childcare Vouchers for as long as you need them or remain with your current employer. If you leave the Childcare Vouchers scheme for Tax-Free Childcare you will not be able to re-join.

Circumstances change, and what’s right for your family now may not be right for you later (for example an increase in earnings or stopping work could mean you are not eligible for some childcare support). By staying on your Childcare Vouchers scheme, even if you pay the minimum amount, you can keep your funding options open.

Speak to your employer today to find out how to join.