Childcare

Changes have been made to the tax and national insurance (NI) rules on the treatment of employer-supported childcare. The new rules are effective from 6 April 2005.

One of the most significant changes has been the introduction of a £50 per week tax and NI exemption for childcare vouchers (and other employer-supported childcare). There has been some negative publicity recently from the Low Incomes Tax Reform Group surrounding the interaction of the new regime with the existing tax credits regime. There is a concern that for employees in receipt of Working Tax Credit (including the childcare element) they could end up being worse off by entering into an arrangement whereby the employer pays some or all of their childcare costs. This is because part of the entitlement to these credits is based on childcare costs paid personally rather than by the employer.