Changes to childcare voucher system to be rolled out early 2017

By Jonathan Watts-Lay, director, WEALTH at work

Changes to the childcare voucher system will be rolled out from early 2017. Parents who are already members of the current childcare voucher system can continue in it, providing their employer will still provide access to it; new members will also have the opportunity to join the current scheme up until April 2018.

The new system, called Tax-Free Childcare, will be available online and the state will contribute 20p for every 80p that parents spend on childcare.  This is the equivalent of the 20% tax many people pay on their earnings, which gives the scheme its name.

The maximum state contribution per year will be £2,000 per child (or £4,000 for disabled children). Parents must be in work to qualify and earning just over £100 per week, but no more than £100,000 per year, however they can have a combined income of over £100,000.

Parents will be able to apply by opening an online account, which will be available through the government website They pay into this account, which is then topped up by the government to cover the cost of childcare with the registered provider. Parents will then need to re-confirm their circumstances every three months. It is possible to pay in more some months, and less at other times, meaning parents can build up a balance in their account to cover times when they need more childcare than usual e.g. summer holidays.

Whether parents are better off with the old or new scheme depends on factors, including how much they earn, how much they spend on qualifying childcare, whether both parents work, how old their children are, and how many children they have.  Tax Free Childcare will only be available to parents with children up to the age of 12 (17 if disabled), whereas the current childcare voucher system is available to children up to the age of 15 (16 if disabled); so those with older children could lose out. There will also be no National Insurance (NI) saving under the Tax Free Childcare system; therefore employed parents with lower childcare costs could be worse off. Unlike the current childcare voucher system, Tax Free Childcare does not rely on employers offering the scheme to parents This is good news for those who work for companies that don’t offer the childcare voucher system and the self-employed.