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Families may be left "confused" by changes in the system of childcare support taking place later in the year, a charity has warned.

21/05/2015

Families may be left

These vouchers can be bought by parents from their salary before tax is deducted, but will be replaced in the autumn by new top-up payments.

The Family and Childcare Trust said families had big decisions to make.

Changes

At present, the Employer Supported Childcare scheme allows working parents, who are not self-employed, to claim support to pay for registered childminders.

The vouchers, worth up to £243 a month, can be bought by each parent from their salary before tax. For basic rate taxpayers, this can mean an annual saving of £930.

In the autumn, the scheme will be replaced with a new "top-up" payment, where working families will be able to claim government support worth 20p for every £1 they spend on childcare.

It will be available for single parents with a salary of up to £150,000 or couples with a combined salary of up to £300,000, including self-employed people. However, families where one parent stays at home will not be eligible.

The new Tax-Free Childcare scheme will operate alongside the existing Working Tax Credits, aimed at the lowest-income households, while the voucher scheme will close to new entrants and be slowly wound down.
Lucy Payne, director of Kiddivouchers, which administers childcare vouchers for private firms, told BBC Radio 5 live that families with just one working parent needed to apply for the old-style vouchers soon.

However, she was worried that many might fail to do so, not realising they stood to lose out.

"Our big issue with the new scheme really is the complexity of the eligibility checking," she added.

"With childcare vouchers, as they exist at the moment, employers actually carry out an element [of this], the new scheme is actually going to involve the parents doing that themselves."
Employer benefits

Until now, employers have also benefited, as they do not pay national insurance contributions on childcare vouchers. This can be equivalent to a saving of £373 per employee. Ms Payne said some firms were now considering whether to continue offering childcare vouchers.

"We have had a number of employers who have talked to us about this. Some of them felt that, once the scheme was closed to new joiners, there would not be a lot of point in carrying on," she said.
"But for many of them, they have got anywhere up to a 20% take-up [among staff]. So the National Insurance savings that the employers are making through the scheme are quite significant."

Jill Rutter, of the Family and Childcare Trust, told 5 live that middle and lower-income families might be confused about which was the best deal.

"Parents in the £30,000 to £40,000 income group have big decisions to make about what system is best for them. Lots of people have variable incomes, they do overtime, they are paid on commission, it is incredibly complicated," she said.

The charity claims the average cost of a part-time nursery place for a two-year-old now stands at £6,003 a year, a figure that rose by a third over the last Parliament.

Campaigners claim the new top-up payments will subsidise these fees, offering support for working couples who may be earning up to £300,000 a year, while ignoring low-income families where one parent stays at home.

In a statement, the Treasury told 5 live that it was parents that wanted to work but who could not afford to, that the new policy was aimed at.

"Tax-Free Childcare will give almost two million families up to £2,000 of support per year per child, via a new simple online system [supporting] working families to help them with the costs of childcare, and enable them to work - or increase their hours in work - should they wish to," the Treasury said.

By Louise Greenwood
Business reporter
BBC News


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