If you are currently paying childcare costs or will do in the near future, are you aware that the scheme for claiming tax relief is changing in the Autumn of 2015?
Currently you may be claiming relief through the childcare voucher scheme. The childcare voucher scheme enables the parent to claim £55 per week of childcare vouchers if entering the scheme before April 2011, reducing to £28 or £25 depending on whether you are a higher rate taxpayer for those joining the scheme after this date. These vouchers are tax and NI free, providing savings of £933 on £55 per week reducing to £623 for the lower amounts.
The tax credits system pays up to 70% of childcare costs but is, of course, dependent on the claimants’ income.
The new system will give tax relief at 20% on childcare costs of up to £10,000 per child.
Both parents need to be working and neither parent must be an additional rate taxpayer.
Parents who already receive child care vouchers don’t have to switch to the new system unless they want to. So the question is “do I switch or do I not switch?” There is no easy answer to this as it will vary from person to person depending on their individual circumstances. Factors such as how many children you have, coupled with the level of childcare costs involved, will feature heavily in any decision.
It is important to note:
- Once a claimant leaves the childcare voucher system he/she cannot rejoin it.
- In Autumn 2015 the scheme will be closed to new entrants who will only be able to participate in the new scheme
For anyone in receipt of childcare vouchers or considering the scheme, it is important to review which option is the most beneficial to you.
For more information contact Green & Co.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.