Definition
A salary sacrifice benefit that allowed employees to exchange part of their gross pay for vouchers to pay for registered childcare, providing savings on income tax and National Insurance. The scheme has been closed to new entrants since October 2018.
UK Context
Childcare vouchers were replaced by the government's Tax-Free Childcare scheme for new applicants from October 2018. Employees already registered in a voucher scheme can continue receiving them from the same employer. The tax-free limit was 243 pounds per month for basic rate taxpayers. Employers can no longer offer childcare vouchers to new joiners.
Best Practices
- Continue administering vouchers for existing participants who remain in the scheme
- Inform new employees about Tax-Free Childcare as the current government-supported alternative
- Review whether existing voucher participants would benefit from switching to Tax-Free Childcare
Frequently Asked Questions
Can new employees join a childcare voucher scheme?
No, childcare voucher schemes closed to new entrants on 4 October 2018. Only employees who were already registered with their current employer before that date can continue to receive vouchers.
What replaced childcare vouchers?
The government's Tax-Free Childcare scheme replaced vouchers for new applicants. It provides up to 2,000 pounds per child per year (or 4,000 pounds for disabled children) in top-up payments toward registered childcare costs.