From autumn 2015, parents will be able to claim vouchers for every child under the age of five. The government will provide 20% of childcare costs, up to £1,200 for each child. This effectively means parents will not pay basic-rate tax on the first £6,000 they spend on registered childcare.
Parents will buy vouchers from the government, rather than via their employer. To be eligible, neither parent must earn over £150,000 a year and both must work. Single working parents will be eligible. The scheme is intended to be extended to all children under 12 by about 2020.
For employers, the new scheme does not mean the current ECS will fall away. Parents who are already part of the ECS or who join it before autumn 2015 will continue to receive childcare vouchers under current rules but can switch to the new system.
Many parents may choose to remain with the old system if they have children over five years old and because the £1,200 clawback is less than the saving that could potentially be received under the ECS.
This means employers that provide access to the ECS will keep their contract with their provider and pay administrative charges for staff that remain in the scheme. However, the employer will still get the 13.8 % national insurance saving on vouchers bought under the ECS until the final employee leaves the scheme.
Suzanne Tyrrell is an employment lawyer at Taylor Wessing
