Time running out to beat childcare voucher deadline

18 March 2011

Higher rate tax-payers should sign up to voucher schemes before benefits are slashed.

Working parents who pay higher or additional rate tax have less than three weeks to sign up to childcare vouchers, before scheme changes will slash the benefits currently available to such families by up to half.

Currently, all working parents are able to pay £55 a week into a childcare voucher account from pre-taxed salary, saving each parent up to £1,195 a year. However from 6 April all new scheme members paying higher rate tax will only be able to contribute £28 a week, while additional rate taxpayers will be limited to £22.

Existing members won't be affected by the new rules until they change jobs and join a new scheme.

At the same time around 750,000 more people will start paying a higher-rate of tax as the threshold for 40% income tax will be lowered to £43,875 to £42,475.


Childcare costs are soaring and according to the Daycare Trust, fees increased 4.8% last year alone. In England it now costs £5,028 on average each year to keep a child under two at nursery for 25 hours a week, while for parents in Scotland that rises to £5,178. The figure in Wales is slightly lower at £4,723.

Mike Warburton at Grant Thornton says: "This is the last chance saloon for existing higher rate taxpayers to benefit in full from this valuable relief, together with potentially 750,000 others about to be pulled into the higher rate club by the Chancellor's measures."



Add new comment