The Government announces changes to childcare vouchers from 2015

Since this article was published, the government have announced Tax-Free Childcare will be launched in early 2017.

As childcare costs continue to rise, the Government has used the 2013 Budget to announce new measures to support working parents. The proposals will make childcare vouchers available to more families and will enable many parents to enjoy higher savings on their childcare costs. However, not all families will be able to benefit from the changes. Here’s our guide to the new childcare voucher scheme and a look at the winners and losers:

  • A new childcare voucher scheme, due to be launched during or after Autumn 2015, is expected to allow parents to receive Government funding for up to 20% of their childcare costs.
  • Current childcare voucher arrangements are to remain in place and open to new members until the new scheme is launched.
  • Parents who sign up for the current childcare voucher scheme will be able to remain in it even after the new scheme has launched. However, some current scheme members may choose to switch to the new scheme from 2015, as in some cases this will provide higher savings.
  • Under the new arrangements, parents will set up an account with a childcare voucher provider such as KiddiVouchers, and they will pay into this account to purchase childcare vouchers. The Government will top up each parent’s childcare voucher account with a 20% contribution towards their childcare costs, up to a maximum contribution of £1,200 a year per child.
  • Under both the current scheme and the new scheme, parents are only allowed to use their childcare vouchers to pay for registered childcare.
  • The new scheme will initially only be available in respect of children under 5 (and disabled children up to age 16), although there are plans to make it available for all children under 12, probably by 2020.
  • The new arrangements will only be available to single parents who work at least 16 hours a week, or to couples who both work at least 16 hours a week.
  • The Government has also announced that lower earners will be eligible for up to 85% of their childcare costs to be paid by Universal Credit from April 2016 (compared to up to 70% in the current tax credit system). Parents who receive tax credits or Universal Credit will be ineligible for childcare vouchers.