New Tax-free Childcare Scheme – Draft Guidance Issued

The Government has published draft guidance on its new tax-free childcare scheme which is scheduled to commence in Autumn 2015.

The scheme will enable working families to claim 20% of childcare costs for children under 12, capped at £2,000 per child per year. The scheme will be available in relation to children under 5 from autumn 2015 and then extended to children under 12 within 12 months. 

The guidance confirms that once the new scheme is in place employers can continue to provide childcare vouchers on a tax and National Insurance Contributions (NIC) exempt basis to employees who already receive them.  However, they will not be able to do so if the employee opts for the new tax-free childcare. 

Whilst employers will also be able to offer childcare vouchers to new employees (or existing employees not already in receipt of vouchers), they will not be able to do so on a tax and NIC exempt basis. This is the case even if they were in receipt of childcare vouchers with their previous employer.  Changing employers within the same group is treated as being a new employee, as is moving to a different PAYE scheme.  

Comments on the Tax-Free Childcare draft guidance are invited by 15 December 2014.