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Time is running out

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.


Childcare funding: The choice is yours (but only until your March payroll!)

As a working parent you will be all too aware of the crippling cost of childcare. For most families, saving money through a childcare funding scheme makes a big difference to monthly household finances.

You will no doubt also be aware that the government introduced a new childcare funding scheme in April last year, Tax-Free Childcare, changing the package of support it offers working parents. Since its launch, the onus has been on parents to inform themselves about the different options available and decide what action to take.

However, as reported in the news recently, the new government scheme has been plagued by technical glitches since its launch, affecting thousands of parents and even leaving some of them unable to pay for their childcare.

Most importantly though, with just over a month left to make a decision either way before the Childcare Vouchers scheme closes to new applicants from 6th April 2018, now is a good time to review your options and ensure you are fully informed – particularly as many parents could end up losing out. And if you have any working parent friends or relatives, make sure they know about Childcare Vouchers before it’s too late.


What changes have the government made?

If your employer is signed up to a Childcare Voucher scheme, working parents can save up to £933/year on the cost of childcare for children up to the age of 15 (or 16 if disabled).* Families where both parents work and belong to a scheme can save up to twice that amount.

The vouchers can be used to pay for any OFSTED (or equivalent body) registered childcare provision including nurseries, wrap-around care at school and after-school clubs held on school premises.

Under the government’s new Tax-Free Childcare scheme, parents can claim top-ups for childcare costs. The government will add 20p for every 80p spent up to a limit of £2,000/year in top ups per child under 12 years old.  Parents will need to reconfirm their status and eligibility every 3 months.


What is happening to the existing Childcare Voucher scheme?

Childcare Vouchers will continue to operate alongside the new scheme but will be closed to new entrants from 6th April 2018. You cannot use both schemes simultaneously and if you leave your Childcare Voucher scheme you will not be able to re-join.

This means that any parent currently in the scheme will continue to benefit from savings until their child reaches 15 and they remain with their current employer. Any parent wishing to benefit but not currently in the scheme must be in receipt of their first Childcare Vouchers by 5th April. Check with your employer when the final cut-off date for joining is in your organisation.


What about the increase in childcare provision for 3 & 4 year olds?

From September 2017, free childcare for 3-4 year olds in England doubled from 15 to 30 hours per week, which means working parents now have a total of 1,140 hours of free childcare to use flexibly over the course of the year.

Only those families where both parents earn at least £120/week (equal to 16 hours at the national minimum or living wage) are eligible to receive the free hours, and neither parent must earn £100k/year or more.

For most parents, this reduces the number of hours of childcare you have to pay for, which in turn would decrease your saving with Tax-Free Childcare. This means that more parents will be better off with Childcare Vouchers than Tax-Free Childcare.


Five Actions to Take Now

 1.     If you’re on a Childcare Vouchers scheme already you don’t need to do a thing!

Parents already on a Childcare Voucher scheme who have received vouchers in the 12 months prior to 5th April can continue as usual for as long as:

•          You remain with your current employer

•          Your child is eligible

•          You receive at least one voucher payment within a 12 month period

If you leave Childcare Vouchers for Tax-Free Childcare, you will not be able to re-join.

2.     If it’s been a while since you received Childcare Vouchers, act now to reactivate your account

If, by the 5th April, you will not have been in receipt of any vouchers for 12 months or more, you will need to order and be in receipt of new vouchers before this date to ‘reactivate’ your account and remain eligible.

 3.     Maximise the benefit you receive from Childcare Vouchers

Many parents don’t realise they can bank unspent vouchers during term time and use these to pay for holiday clubs, tutoring and after school activities with an OFSTED registered provider.

You can also use Childcare Vouchers in combination with 30 hours free childcare.

 4.     Keep your options open

If you haven’t joined a Childcare Vouchers scheme already, ask your employer whether they run a scheme and how to sign up.  If they don’t, you can recommend it to them. Remember you will need to have received your first vouchers by 5th April 2018. Check with your employer when the final cut-off date for joining is in your organisation. If you decide to leave the scheme later, you can continue to use any accrued Childcare Vouchers, even if you join Tax-Free Childcare.

Joining Childcare Vouchers now is the safest response to the changes in funding and provides a financial safety net while you decide which scheme is more suited to you and your circumstances.

 5.     Stay informed

Download Edenred’s Parent’s Guide to Childcare Vouchers and Tax-Free Childcare to help you understand the changes and make an informed decision about your childcare funding.

We are committed to the continued provision of Childcare Voucher schemes and to offering working parents all the information they need to make an educated choice about funding.


*Eligibility will end on 1st September after the child’s 15th birthday, or 1st September after their 16th birthday if they are disabled.