Employer-provided childcare voucher schemes were due to close to new entrants after 5 April 2018. However, the Government has recently announced that this deadline will be extended by six months, to October 2018.

Existing employer-supported childcare schemes are being replaced by Tax-Free Childcare (TFC). There have been teething troubles with the TFC website and concerns about the difficulties for parents in choosing between their various childcare support options. Therefore, the extension is welcome.

Tax-Free Childcare

The TFC scheme offers working parents with children under 12 (or under 17 if disabled) up to a maximum of £2,000 per child per year (or £4,000 for disabled children). For every £8 paid in, the Government will add a top-up payment of £2, subject to the maximum. There are income rules: the scheme is not available if the income of a parent or their partner is more than £100,000 and there is also a minimum income threshold.

The scheme is operated through an online account accessible through the Childcare Choices website.

Existing childcare schemes

TFC will eventually replace existing employer-provided childcare schemes, which have tax and NI advantages for both employees and employers. These include childcare voucher schemes – but also directly-contracted childcare schemes, under which the employer pays the childcare provider directly. Workplace nurseries are not affected by the introduction of TFC. We do not know if the six-month extension applies to directly-contracted childcare, as the announcement refers only to voucher schemes. Nor has the exact closing date in October been announced.

Existing members of employer-provided childcare schemes, and members of voucher schemes who apply before the October deadline, can continue to benefit from existing schemes for as long as the employer continues to provide them.

Members of employer schemes who have already moved across to TFC will not be able to move back. In addition to the above schemes, childcare support is also available via tax credits and universal credit.

Choosing the most favourable option

While some people will be better off under the TFC scheme, others may find they are better off with current childcare schemes. And the interaction between the current employer-provided schemes,TFC and the childcare elements of tax credits and universal credit is complex.

The Childcare Choices website includes a calculator to allow parents to check which of the various childcare schemes is most favourable in their particular circumstances. However, this does not necessarily deal with all the options or with more complex cases.


If you would like help setting up an employer childcare voucher scheme before the October 2018 deadline, then please contact us.