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When I decided to return to work, one of the biggest shocks was the cost of childcare. We have luckily benefited from Childcare Vouchers to help pay our nursery fees. Every bit of help working families get towards these often-substantial bills is welcomed. We are fortunate that we are signed up and will continue to receive Childcare Vouchers, but they will be stopped for new registrations soon.

Childcare Vouchers scheme is closing - what should I do?

I am concerned that the alternative Tax-Free Childcare system isn’t open to everyone – we aren’t eligible for it – and for many, it isn’t the better option for all sorts of reasons. Also, as it isn’t employer initiated, I think that less families will engage with it.

I work in the nursery industry and we have had very few parents making Tax-Free Childcare payments since it was rolled out in April 2017 which really surprises me. It been very poorly marketed so I think the reality is that people just don’t know about it.

Making childcare even more unaffordable by taking away the Childcare Vouchers scheme is not going to help the economy and get people back to work. I despair! If you are a family in which one or both of you works, you need to act now to make sure you have selected the right option for you before it is too late in the coming weeks.

Childcare Vouchers

Childcare Vouchers is the workplace benefit that allows parents to buy vouchers to pay for childcare through ‘salary sacrifice’ – up to a maximum of £55 a week, depending on their tax band.

The parent agrees to sacrifice part of their salary, and in return they are given tax-free vouchers that can be used to pay for childcare. Childcare Vouchers are a widely-used benefit that are popular with parents and employers alike, with more than 60,000 businesses of all sizes offering vouchers to more than 750,000 parents in the UK.

To use Childcare Vouchers, parents opt in to the scheme offered by their employer, and select to give up a certain amount of their pre-tax salary. They receive this amount in Childcare Vouchers instead, saving on national insurance and tax in the process.

Depending on their tax band, parents can save up to £933 a year each.

Tax-Free Childcare

The government introduced the Tax-Free Childcare Service in April 2017, with the intention that this scheme would replace the current Childcare Vouchers scheme.

I’ve written about the scheme and its eligibility criteria and application process here.

Closure of the Childcare Vouchers scheme

The closure of the Childcare Vouchers scheme is imminent; from October 2018, parents will no longer be able to join the scheme through their employer.

There are some major differences between the two schemes. There will be some parents who are eligible for Childcare Vouchers who will not be eligible for Tax-Free Childcare and they could lose out if they don’t sign up before the deadline.

Nursery child building blocks

The cut-off date for applying for Childcare Vouchers        

Tax-Free Childcare continues to be rolled out. The government has now confirmed that the technical issues which dogged the initial roll-out are being managed, and parents of all eligible children will be able to apply by 31 March 2018.

Childcare Vouchers applications by parents not yet enrolled in their employer’s scheme will be no longer allowed after September 2018. Also, existing registrants who change employer for any reason will not be able to enrol in the Childcare Vouchers scheme of their new employer.

So, you have until 31 September 2018 to register for your employer’s Childcare Vouchers scheme before you lose your right to. You must already have a child to start claiming.

Key differences between the schemes

  • Childcare Vouchers is available to parents with children up to the age of 15. Tax-Free Childcare is only open for those up to the age of 12 (rising to 17 where the child has a disability).
  • Childcare Vouchers is only available to those parents whose employers support a scheme. Tax-Free Childcare is open to everyone, including the self-employed.
  • Childcare Vouchers is not means-tested (although the amount you can claim declines as you earn more). Tax-Free Childcare is only open to parents who meet the eligibility criteria.
  • Under Childcare Vouchers, the maximum benefit to one parent is £933 per year (based on the parent being a basic rate tax-payer). Each parent can sign up for Childcare Vouchers so this benefit could be doubled assuming two working basic-rate parents. Tax-Free Childcare accounts are opened for each child; using Tax Free Childcare, parent(s) could get up to £2,000 per child.

Which scheme is best for you?

The Childcare Voucher Providers Association estimates that 70% of parents are better off with Childcare Vouchers because Tax-Free Childcare is not available for those already claiming child tax credits, working tax credits or universal credit.

They consider that  “Tax-Free Childcare is fairer and better targeted than vouchers, but this doesn’t take into account that families would lose all support under Tax-Free Childcare if one parent was not in work for any reason – this could be an unexpected job loss or having to stop working to look after an elderly relative. With Childcare Vouchers, the family would still receive support where they wouldn’t with TFC via the other working parent.”

Ultimately though, the scheme which benefits you will depend on your individual circumstances.

  • Examples where Tax-Free Childcare is better include self-employed people and parents with more than one child who have high childcare costs
  • Childcare vouchers are good for couples where one parent does not work (assuming the working parent’s employer offers Childcare Vouchers), basic-rate taxpayers with total childcare costs of £9,336 or less, higher-rate taxpayer parents with total childcare costs of £6,252 or less, and higher earners, (anyone earning £100,000+ isn’t eligible for Tax-Free Childcare).

To help you decide…

There is a lot of guidance out there to help you make the decision which is right for your personal situation:

  • You can use this calculator to work out if Childcare Vouchers are going to affect any tax credits you receive. (If you don’t claim tax credits, then you’ll ALWAYS be better off using vouchers to pay for childcare than not using them).
  • Use this childcare calculator to work out which type of support is best for you.

When deciding which alternative is right for your family, it is important also to bear in mind your future circumstances (for example children turning 3 meaning government funded childcare sessions kick in, or one parent being unable to work), as well as your current situation.

Already signed up for Childcare Vouchers?

If you have joined your employer’s scheme and get your first voucher by 5 October 2018, you will continue to receive Childcare Vouchers providing:

  • you stay with the same employer. (If you change employer, you will not be able to enrol in a Childcare Vouchers scheme after October 2018).
  • your employer continues to run a Childcare Voucher scheme (unlike Tax-Free Childcare, Childcare Vouchers are administered via your employer).
  • you don’t take an unpaid career break of longer than a year.

If you are better off with Tax-Free Childcare

If you are better off with Tax-Free Childcare, you can apply here. Once your application has been successful:

  • You can’t continue to claim Childcare Vouchers; you must tell your employer within 90 days if you get Tax-Free Childcare. They’ll then stop giving you new Childcare Vouchers.
  • You can continue to use any Childcare Vouchers you already have, including to make a joint payment for childcare with Tax-Free Childcare. There’s no deadline for using the Childcare Vouchers in your provider account.
  • Once you’ve left your employer’s Childcare Voucher scheme because you have elected to receive Tax-Free Childcare, you will not be able to rejoin.


It’s important also to note that in the term after your child turns three, you will still be entitled to 15 hours of Universal funded hours or 30 hours if you are eligible. This is an entirely separate initiative.