Parents are faced with a bewildering choice of how to fund childcare costs. Employers can help by giving employees tax-and NIC-free childcare vouchers; by directly contracting with a childcare provider to provide places for employees’ children; or by running a workplace nursery.
The schemes to provide childcare vouchers or directly contracted childcare will only be open to new applicants who join before 5 October 2018. Employees who have signed up to one of those schemes before that date can continue to receive tax-free childcare up to the permitted weekly limit (£55, £28 or £25 depending on their marginal tax rate) until they leave the scheme.
Children qualify for this employer supported childcare until 1 September after their 15th birthday (16th for disabled children). The vouchers can only be redeemed with registered childcarers, so they can’t be used to reimburse grandparents who provide childcare, unless those individuals are also registered child minders.
The savings in tax-free childcare accounts, can only be used to pay for care for children aged under 12 (17 if disabled). Under this scheme, the government contributes £2 for every £8 the parent (or other relative) deposits into the account, up to a maximum of £2,000 of government support per child per year.
A parent is not supposed to double-up their childcare support by also receiving employer-provided childcare vouchers or directly provided childcare. The parent should tell their employer in writing, within 90 days of opening a tax-free childcare account, that they have done so; the employer should take that employee out of the childcare scheme.