For parents looking to start using childcare vouchers, or employees looking to introduce a scheme to staff, now is the time to do it. As I mentioned in my last post, we’re in a strong position under the coalition Government, but there are changes in store next year.
From 6th April 2011, childcare voucher scheme rules will change for new entrants who, regardless of their salary, will receive the same income tax relief as basic rate taxpayers do currently.
In order to calculate an individual’s savings, employers will have to estimate, from the beginning of the year, the earnings of any employee joining a scheme. The amount of savings will be based on the level of these estimated earnings:
› If the level is below the basic rate tax limit for the year, the employee will be entitled to £55 exempt income per qualifying week
› If the level is above the basic rate tax limit but below the new additional tax limit (50%) the employee will be entitled to £28 exempt income per qualifying week
› If the level is above the additional tax limit (50%) the employee will be entitled to £22 exempt income per qualifying week.
These changes will make saving uniform across all tax bands, ensuring equal benefit for all. It means that every parent, regardless of how much they earn, will be entitled to approximately the same level of tax exemption at £11 per week.
Anyone already in or offering a childcare voucher scheme on 6th April 2011 will not see a difference in the way their savings are calculated, which is why I encourage you to sign up today.