Government issues guidance on changes to employer-supported childcare

As a result of the changes to employer-supported childcare schemes due in April 2011, HM Revenue and Customs has issued guidance on changes that employers and employees should be aware of.

Under current arrangements, employees on higher earnings receive a greater tax saving than those who pay tax at the basic rate.

The change evens out the amount of tax saving available for all employees regardless of the rate that the individual pays tax.

The changes will mean anyone who joins an employer supported childcare scheme from 6 April 2011 will receive the same level of income tax exemption, which is approximately £11 per week.

Simon Moore, managing director at Computershare Voucher Services (CVS), said: “Childcare and encouraging people to return to work are high on the government agenda at the moment and childcare vouchers remain the most viable way to save money on registered childcare, particularly following the removal of child benefit for many parents.

“The proposed change promotes equality of benefits, but it will mean those on higher incomes will see their overall savings reduced unless they sign up to a scheme before April 2011.

“Those already in a scheme when any changes take effect will not see a difference in the way their savings are calculated, so during the next few months I expect to see an influx of parents and proactive employers signing up to schemes.”

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