Childcare Voucher regulation change

Childcare Voucher regulation change

Childcare vouchers scheme regulations are changing in April 2011 under the Government’s new tax plans.

Employees have a month to join a CCV scheme before the tax treatment changes in April.

Salary sacrifice rules enable employees to pay for childcare out of income before tax and National Insurance is calculated. Under these arrangements, employers will ask employees to give up some salary in return for benefits.

This is tax efficient for both the employee and employer; a basic rate payer would save around £300 per £1,000 of vouchers.

Taxpayer Basic High Top
Current rule £890 £1170 £1460
From April £920 £610 £590

In the June 2010 emergency budget, the Government announced major changes in the amount of vouchers allowed for higher rate (40%) and top rate (50%) tax payers. Currently the scheme benefits top rate and higher rate earners over basic rate payers. The new rules are intended to treat all tax payers equally, but changes to national insurance in 2011 mean basic rate taxpayers do much better. Note: The rules apply only to new CCV scheme members. Employees may wish to consider carefully joining the scheme prior to April 2011. It may be particularly advantageous for top rate taxpayers.

Changes to Coroni’s Reflex application enable administrators to manage the new regulations.