Childcare vouchers deadline fast approaching
QUESTION: Our first child was born recently and I have received information in relation to childcare vouchers and I note a new scheme, Tax Free Childcare, has commenced, but I can still register for the old scheme. Can you explain these schemes to me?
ANSWER: The Government will withdraw the tax and national insurance relief associated with childcare vouchers for brand new applicants from October 4, with Tax-Free Childcare (TFC) providing help with childcare costs instead. For anyone who has not claimed childcare vouchers yet, it means they need to join in time for their employer to action their application and provide the voucher by their last pay day before October 4, 2018. If an employer has already finalised their payroll, it may be too late to join, but anyone who may be eligible should check now and take action.
TFC can be claimed instead of childcare vouchers, but the rules for the TFC scheme are different. Whilst some families will be better off under the TFC scheme, others will benefit more from childcare vouchers.
Individuals need to check their own position carefully because whether they qualify for either the TFC or childcare vouchers scheme and how much help they can get, depends on a number of factors including hours worked, income, number of children and the amount of childcare costs. There are many childcare offerings available and it is important families carry out the proper research. HMRC's current childcare calculator can be helpful in supporting the correct decision.
Anyone who is already receiving childcare vouchers, or was provided with a voucher in any of the 52 tax weeks ending on or before October 4, will continue to benefit from the tax and National Insurance relief for the foreseeable future as long as they stay with the same employer, their employer continues to offer the scheme and they do not have a gap of more than 52 weeks between vouchers. However, brand new applications for childcare vouchers will no longer be possible from October 4.
This means prospective applicants who wish to claim childcare vouchers will have to do so in time for at least one childcare voucher to have been provided by October 4. In practical terms, they need to join in time for their employer to action their application and provide the voucher before that date. For some people, it may already be too late.
It can be difficult for people to work out which childcare scheme is best for them. Alongside childcare vouchers and TFC, childcare help is also provided through the tax credit and universal credit systems. In some cases, making an application for one scheme can end financial support under another and so people must ensure they check their position carefully before making any applications.
The Childcare Choices website offers a calculator to help people make these choices, but it does not currently include universal credit and it may not give accurate answers for those with more complex circumstances such as variable childcare costs.
A general rule of thumb is that childcare vouchers may be better for smaller families with lower childcare costs, and TFC better for larger families with higher childcare costs. However, families can't switch back and forth between the two schemes, as their childcare needs change. Families who register for TFC can't switch to childcare vouchers at a later date, but parents who are registered for childcare vouchers can switch to TFC.
:: Malachy McLernon (firstname.lastname@example.org) is a director of PKF-FPM (www.pkffpm. com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.