Childcare Voucher System Extended for Six Months
- Current voucher system for childcare will continue for six months
- Will be replaced by new ‘tax free’ system
- Concerns over the new scheme being too complicated
- £1 billion extra could be spent on childcare
The current childcare voucher system will be extended for six months, before being phased out in favour of a new ‘tax-free’ version.
Last night, Education Secretary Damian Hinds, made a concession to extend the voucher system, following opposition from DUP MP Emma Little-Pengelly.
The childcare vouchers were due to end in April, but will now continue until October.
Employer backed childcare vouchers allow you to pay for childcare out of your pre-tax and national insurance income, which can be a huge benefit and make big savings to parents.
Parents can give up £1,000 of their salary, which after tax and NI would be worth £700 anyway, and in return, you get £1,000 worth of childcare vouchers.
In a debate last night, MPs heard that the take-up of tax-free childcare has been well below expectations, with nearly £1 billion earmarked for childcare being returned to the Treasury.
The DUP, who normally backs the Government on votes, has always opposed changes to the childcare voucher system.
DUP MP Ms Little-Pengelly said, “Could the Secretary of State agree with me that, given the concerns raised across this House in relation to the April closure of the childcare vouchers scheme, that there should be a delay in the closure of that scheme, to allow for the concerns to be addressed?”
Mr Hinds replied confirming that childcare vouchers will be open for a further six months to new entrants.
The new system was announced last April, and will allow parents to save on the cost of child care, as the government will contribute towards costs.
The scheme should also help parents who are working part-time and facing a ‘pay-penalty’ for doing so.
How Can You Get The New Scheme?
Working parents can access it by opening up an account online.
Once the account is open, parents can put money for it, and it will be topped up by government contributions.
This is an extra 20p for every 80p paid in, which has given it the name ‘tax free’.
A similar scheme to this existed before, but it was capped at the age of nine.
As of Wednesday 14th February, it’ll be available to all under-12s, a moved that the Government claims will save families up to £2,000 a year.
HMRC said that 190,000 parents have already signed up to the scheme since it was launched in April 2017.
Liz Truss, Chief Secretary to the Treasury, said, “Tax-free childcare will cut thousands of pounds from childcare bills, and this is good news for working parents.
“More parents will be able to work if they want to, and this demonstrates our commitment to helping families with the cost of living.”
The system is coming out at a time when an estimated 450,000 women aren’t going back to work after having a child, as the cost of childcare has got too high.
Which is Better?
Families that have already used the system have had very positive responses from it, however there have been many technical difficulties with it.
One mum, Nicole, said, “I was concerned about the cost of child care, because I don’t get any other support, and I’m a single mum with 15-month old twins.
“The extra money makes a huge difference, and I find the system really easy to use.
“It allows me to comfortably work full time, knowing that my children are being well looked after.”
When first introduced to families in April last year, many parents reported problems with it.
Some were locked out of their online account, and others were unable to access the money that they had put in to the account.
In November, the scheme was suspended so that all technical issues could be resolved, but has now been re-opened, as well as being extended to families with children under 12.
HMRC said, “We made significant improvements to the child care service after some parents experiences issues, and we continue to implement technical updates to further improve the customer experience.”
Do you use childcare vouchers? What do you think of the new system? Let us know in the comments!