Childcare Vouchers from 6 April 2011 – the new rules

HM Revenue & Customs has published a technical note outlining the changes to employer-supported childcare proposed to take effect from 6 April 2011. It may be seen at http://www.hmrc.gov.uk/employers/employersupportedchildcare.pdf

The most important point to note is that the changes will affect only those who are not already participating in their employer’s childcare vouchers scheme at 5 April next year. Everyone already participating by then will continue to enjoy tax relief at whatever is the employee’s marginal rate, including those with a taxable income greater than £150,000 and therefore making them liable to additional rate tax at 50%.

New entrants to an employer’s vouchers scheme on and after 6 April 2011 will be subject to a reduced maximum of tax-free vouchers. This maximum is at present £243 per month. For new participants

• whose estimated earnings and taxable benefits exceed the sum of the personal allowance (£6,475 in 2010-11) and the basic rate limit (£37,400 in 2010-11), ie a total of £43,875 subject to whatever changes are announced in due course for the allowances and tax bands to apply in 2011-12, the maximum monthly amount in vouchers will be £124
• whose estimated earnings and taxable benefits exceed the additional (50%) rate limit, the maximum monthly amount in vouchers will be £98.