If an individual is already in the Childcare Vouchers scheme and getting 40% tax relief, then they're better staying where they are, aren't they?
And is there any benefit even if they're only getting the effective 20% tax relief on Childcare Vouchers?
So is this announcement a lot of hot air?
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Replies (5)
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Doesn't it depend...
... on how much your total childcare expenditure is?
If you're paying £10,000 or more per year, then the treasury funds £2,000 under the new arrangement. £10,000 wouldn't cover two kids with a childminder full time.
Obviously to be full time with a childminder, they're pre-school age and 3 and 4 year olds are already entitled to 15 hours free nursery care per week (which labour proposes to increase to 25 hours).
If you're only paying £243 per month (£2,916 per year) it's neutral for a basic rate taxpayer (£583 funded by the treasury), but for a higher rate taxpayer with a scheme that existed prior to 6 April 2011, they are, as you say, better off at that level.
I suppose that's the benefit
Maximum level for now is only £2,916 and we're looking at £10,000 in the future.
So perhaps it's not all hot air :-)
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Didnd you get NI relief too under the old scheme?
Ie it was treated as a reduction in gross pay?
This was per employee, not per child.
New scheme is income tax only and per child.
Comparison Table
There is a comparison table doing the rounds - the original source was moneysavingexpert - so I would be careful about relying on it and I haven't checked the figures but it may be worth a look.
I don't think I can post links on here but if you put "moneysaving expert & new tax-free childcare scheme" into google, i'm sure you will get back to it.
Just another disclaimer - I have only had a quick look at it - it may be absolute rubbish....
I've had a quick look at the table and I think you will need to perform your own calculations as there are so many factors to consider.
According to my quick and dirty calculations a basic rate tax payer with one child would be better-off under ESC (post April 2011) with childcare costs up to £388 per month. (Happy to be corrected on this!)