Loss of tax and NI relief on childcare vouchers

The government has announced that April 2011 will be the end of the current exemptions from tax and NI on the value of childcare vouchers issued by employers.  It is proposed that the released funding would be used to provide free nursery places for 2 year olds, in addition to the provision in place for 3 and 4 year olds.

The current system is worth up to £373 to an employer, £900 to a basic rate tax paying employee, £1200 to a higher rate taxpayer, and cost the UK £500m in 2008-9.

The withdrawal of the benefit is to be phased; existing recipients will not be affected until April 2015, but no-one will be able to join the scheme from April 2011.

Gordon Brown has also said that ‘low and middle-income working parents will be able to benefit from childcare support through tax credits worth an average of £68 per week for 470,000 – much more generous than tax relief on vouchers.’