Finance Bill 2011: Government confirms restriction on tax relief on childcare vouchers for higher-earners

The government has confirmed it will introduce a restriction on the level of tax relief available to higher-rate and additional-rate taxpayers who receive childcare vouchers or directly-contracted childcare.

The legislation, announced in the Finance Bill 2011 consultation draft, is due to come into effect from 6 April 2011 and will bring the tax relief for higher earners in line with the amount available to basic-rate taxpayers.

The measure was announced by the previous government in the 2009 pre-Budget report, and by confirmed Chancellor George Osborne in the June 2010 emergency Budget.

Currently, basic rate taxpayers can receive up to £900 a year in tax relief while higher rate taxpayers can receive up to £1,200 of support a year through employer-supported childcare (ESC).

The Finance Bill 2011 draft legislation states: “This reform will make ESC fairer, better-targeted and more progressive.”

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