Major changes to the Childcare voucher system

Following years of speculation amongst employers and parents as to whether or not the Government would retain the current childcare voucher scheme, we now know that it is to be replaced with a new scheme: Tax-Free Childcare.


Earlier in the year, a petition for retaining the scheme generated nearly 100,000 votes, but when the topic was discussed in parliament earlier this year, the outcome was that ‘The Government is investing more in childcare than ever before. Tax free childcare is one part of that childcare support and is fairer and better targeted than vouchers.’


From April 2018, parents will no longer be able to join the existing childcare voucher scheme, but those who have already joined will be able to continue for as long as their employer runs the scheme. Through the new Tax-Free Childcare scheme, eligible families will get approximately 20% of their annual childcare costs paid for by the Government – for every £8 paid into the scheme, the Government will top this up by £2. Parents can contribute up to £8,000 per year, per child, into the scheme, and therefore the maximum Government contribution per child is £2,000 per year.


Voucher providers are supporting their members and keeping them up to date with the changes in various ways including webinars and seminars. We recommend that employers contact their provider to find out what they are doing for their members.


Please see the attached link for an example of how employers could communicate with their employees about the impact of these changes, and the options available to them: https://www.finchib.co.uk/sample-letter-new-tax-free-childcare-scheme. Please note that the example given is for basic rate taxpayers.


Please feel free to use this, with the appropriate amendments for your company.



Please note that this communication has been drafted in line with Finch Employee Benefits’ understanding of the changes and that FEB are not tax advisers and accept no liability for any decisions made by employees on the basis of this information.  We strongly recommend that employers highlight the need for employees to source independent specialist advice specific to their own circumstances if they are unclear on the options available and their impact.