Employer-supported childcare vouchers to be phased out

The employer-supported childcare voucher scheme will be closed to new entrants from autumn 2015, when the government’s new tax-free childcare scheme, previosuly announced in the 2013 Budget, takes effect.


On 18 March, the government announced it will raise the costs cap to £2,000, up from the £1,200 that was previously proposed.

It also confirmed the scheme will be rolled out to all eligible families with children under 12 within the first year of its operation, which is significantly faster than previously proposed, where children under 12 would have gradually qualified for the scheme over a seven-year period.

The employer-supported childcare voucher scheme will remain open until the new scheme takes effect. Once the new system comes into force, employees that had taken up childcare vouchers prior to this date can remain in existing schemes, so long as they do not change employers.

Existing relief from tax and national insurance contributions for workplace nurseries will be unaffected.

Mark Groom, tax partner at Deloitte, said: ”The new proposals are not only more generous, they are also much fairer for providing tax relief for childcare to a much bigger parent population.

“Currently, only employees whose employers provide either childcare vouchers or workplace nurseries can benefit.

“From autumn 2015, the new scheme will be administered by parents opening an online account through the government website. This will open the relief up to the self-employed, as well as those employees whose employers do not currently provide assistance with childcare.”

The government has said the new scheme will benefit childcare providers, which will be able to receive each child’s payment from a single account under tax-free childcare, rather than keep track of multiple payments relating to a single child from different bank and voucher accounts.

Carole Edmond, managing director of Bright Horizons, said: “Childcare voucher providers have been operating in the UK for more than 10 years, building up a great deal of knowledge by interacting with employers, parents and childcare providers on a daily basis. 

“We strongly recommend the government make full use of this knowledge and experience for the benefit of all stakeholders. 

“Any change brings uncertainty and we all need to be reassured that the new scheme will offer a seamless transition from the current one.

“Payment transactions need to happen efficiently as delays can have serious repercussions for the many small providers in our marketplace.”