Tax relief for childcare vouchers
The Prime Minister recently announced plans to phase out the tax and national insurance exemptions for childcare vouchers. The full details of these proposals are expected to be contained in the Pre-Budget report which is usually published in late November or early December.
It is expectedthat the use of tax exemptions will be withdrawn for childcare vouchers which are first provided after 5 April 2011. However, the Prime Minister has said that employees who are already receiving vouchers will be able to claim tax and national insurance exemptions until April 2015.
The Government is thought to be making these changes as the tax relief is disproportionally beneficial to higher rate tax payers. Government figures suggest that one third of the tax benefits of childcare vouchers goes to the 6% of parents who pay tax at the higher rate.
In place of the childcare vouchers, the Government plans to extend free nursery places for 250,000 two-year olds by the end of the next Parliament.