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Childcare changes

Childcare support is in transition. Employer Supported Childcare (ESC), via childcare vouchers and directly contracted childcare schemes, closed to new applicants on 4 October 2018. The government intends gradually to substitute support via Tax-Free Childcare (TFC). The changes have no impact on workplace nurseries, which remain a taxfree benefit.

Although employers may still provide childcare vouchers to new applicants, these would be subject to income tax, and both employee and employer Class 1 National Insurance contributions, making provision more costly and creating an additional employer workload. It should be stressed that though employees can switch from ESC to TFC, they cannot re-join ESC, and it is advisable to consider better-off calculations before taking any action. Employees can be directed to the Childcare Choices website bit.ly/2RyakSR. If employees change to TFC, they should tell their employer in writing within 90 days. Employers should then stop the provision of vouchers and the associated income tax and National Insurance relief. This could mean stopping or changing a salary sacrifice arrangement. Employee contracts and payroll software would then also require updating. We should be delighted to advise further in any of these areas.

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