Following the election win of the Conservatives, childcare vouchers have become a hot topic once again. The Conservative party made a pre-election pledge to increase the amount of free childcare hours from 15 to 30 by 2017.
Tax-free Childcare is also on the agenda to be launched this autumn. Even with the 30-hours free childcare more parents will be better off using Childcare Vouchers than the new scheme.
An additional 15-hours free childcare for three and four year olds will provide over 600,000 extra free childcare places each year, estimated to be worth £5,000 to working families.
The new scheme will provide savings of up to £2,000 per child, each year. However, parents will have to spend £8,000 in order to receive this as the Government is subsidising 20 percent of each child’s care costs.
To receive the maximum savings of £933 using Childcare Vouchers, parents are only required to spend £2,916 each year on childcare. Both parents can also access the scheme, meaning that there would be potential savings of £1,800 for an outlay of only £5,832.
Example: a family pay £8 per hour for their child’s childcare for 40 hours per week; this would equate to £1,387 per month. With the 30 free hours, their costs would reduce to £346 per month. If both parents used Childcare Vouchers, this cost could reduce even further to only £125 per month, however if they used Tax-free Childcare, this would cost £277 per month, making Childcare Vouchers the better option by £1,824 per year.
As many parents will be better of using Childcare Vouchers to save money on their childcare costs, time is running out for employers to offer the scheme if they don’t do so already and for parents to join these schemes before the autumn. Once Tax-free childcare is implemented, no new organisations or parents will be able to join the Childcare Voucher scheme.
Childcare Vouchers can also save organisations up to £402 per employee on their scheme in Employers National Insurance Contributions, something which will not be available with Tax-free Childcare as it will be administered by NS&I (Nationals Savings and Investments).
John Woodward, Busy Bees Benefits CEO says:
“There isn’t long left for employers and working parents to access Childcare Vouchers, which means there is an urgency for employers to offer a scheme to help their employees to access more affordable childcare.
“Childcare Vouchers can be used to pay for childcare for children up to the age of 16, whereas Tax-free Childcare can only be used for children up to the age of 12. Once on a Childcare Voucher scheme, parents can use it for as long as required, which means if their circumstances change, they can choose to move to Tax-free Childcare. It is important to note that once they move to Tax-free Childcare, they cannot switch back.”
Amie Filcher is an editorial assistant at HRreview.
