Changes to Childcare Voucher Legislation
From 6th April 2011, changes to Childcare Voucher Legislation will take place affecting higher rate tax payers which means they will only be eligible to receive £28 per week in Childcare Vouchers unless they are already in an existing scheme.
Current situation (per parent):
- Basic (20%) Taxpayer. Allowed £55/week vouchers, max. annual gain £890
- Higher (40%) Taxpayer. Allowed £55/week voucher, max annual gain £1,170
- Top (50%) Taxpayer. Allowed £55/week voucher, max annual gain £1,460
New joiners after April 2011 (per parent):
- Basic (20%) Taxpayer. Allowed £55/week vouchers, max. annual gain £920
- Higher (40%) Taxpayer. Allowed £28/week voucher, max annual gain £610
- Top (50%) Taxpayer. Allowed £22/week voucher, max annual gain £590
Where previously the scheme benefitted higher earners disproportionately, these changes were meant to give roughly the same maximum tax gain for all taxpayers, yet when you factor in next year's changes to national insurance, basic rate taxpayers do much better.
Yet the most important point is...
If you are already in the scheme by April 2011, then you can continue
to get the current amount of vouchers.
Therefore if you're planning to join, doing it prior to April 2011 is highly worthwhile for higher taxpayers. Remember, most vouchers have a long date on them so even if you don't quite need them yet, but definitely will, it's worth getting into the scheme before the allowances plummet.
- There is no change for basic rate tax payers; they will remain eligible to receive the maximum amount of £55 per week
- These changes are designed to equalise the tax benefits for higher rate and basic rate tax payers
- Employees already in an existing scheme before 6th April 2011 remain unaffected; regardless of their tax band
For further information please click this link to see the document released by HMRC http://www.hmrc.gov.uk/thelibrary/employee-qa.pdf
In light of these changes we would urge Employers and Employees to register before these changes take place and take advantage of the extra tax savings available:
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