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Breaking News March 14th 2018 Childcare scheme gets six-month reprieve

14 Mar 2018

Education Secretary Damian Hinds made the concession during a Commons debate yesterday March 13th.

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Child Benefit Withdrawn? How to Reduce Your Childcare Costs


As part of a controversial government plan to reduce child benefit spending, Parliament is currently considering proposals to completely withdraw, with effect from 2013, this benefit from families where one or both partners are higher-rate taxpayers.

Higher rate tax, currently fixed at 40 per cent of gross earnings, is applied to all those with earnings of more than £42,475 a year. The end of child benefit for this group will cost families over £1,000 a year for their first child and almost £700 for each subsequent child.

The Rising Cost of Childcare

The Treasury estimates that 1.2 million families will be affected by the proposed changes. Whilst these are clearly families where one or both partners are earning a reasonable salary, most are by no means the super-rich. Indeed, the vast majority are hard- working mums and dads trying to do the best they can for their families.

At the same time, working parents are also facing escalating costs for the childcare they require for their children. The Daycare Trust estimates that average nursery and child minder fees have risen by some 5 per cent in the last 12 months. Wages, on the other hand, have only increased by around 0.3 per cent. With a part-time nursery place for a child under two now averaging £5,000 a year, many working parents are having to consider whether they can afford to continue working.

Providing the Best Care for Your Child

Quality childcare is about more than just a practical necessity for working families. Studies have shown that nursery education and other childcare provision, provided the best standards are maintained, can give your child a flying start in terms of both intellectual and social development. Policy makers from many countries, including our own, have recently been looking at the Danish system of childcare. In Denmark, nearly all parents work and most children attend full-time childcare. Standards of attainment in later life for Danish children are very high, and the Danes argue there is a causal link.

Childcare Vouchers Can Reduce Costs

But, even if child benefit is removed from a substantial number of families, there is still some good news when it comes to childcare costs. An ever-growing number of large and small employers are signing up to HMRC approved childcare voucher schemes. When you join your employer's scheme, you pay for your vouchers directly from your salary with a special tax arrangement called ‘salary sacrifice'.

The advantage of salary sacrifice is that the amount of salary you ear-mark for childcare vouchers is tax and national insurance free. This saves a basic rate taxpayer up to £920 a year and higher rate taxpayers £610. The news gets even better. Both family partners, provided their employer has opted into the scheme, can sign up so that the family can enjoy twice the saving.

The vouchers you purchase in this way through your payroll deduction can then be spent at the regulated childcare provider of your choice, provided they have registered to receive them. You will find that most childcare providers have registered already but, if yours has not, the sign-up process is refreshingly straightforward.

With many of us seemingly about to lose our benefits payments for our children, it makes more sense than ever to look into the savings that childcare vouchers can offer.

Author: Eoin Olivers photo

Author: Eoin Oliver

Eoin Oliver is a web designer and blogger with six years of experience writing content and designing graphics for clients large and small. For the past three years Eoin has been focused on researching and writing about the childcare voucher scheme. When not hard at work, Eoin can be found in the company of his 4-legged companion Layla.

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