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P11D tips – Childcare is not quite child’s play?

20 May 2019

Published by: Stuart Daltrey, Director – Employment Tax

The rollout of tax-free childcare accounts across the country was completed in April 2018 so it was anticipated that the existing system of tax‑advantaged childcare vouchers would close to new users on 5 April 2018. However, parents were allowed to continue to sign up for existing childcare voucher schemes until 4 October 2018 as a result of ‘technical issues’ with the new Tax-Free Childcare accounts.

Childcare vouchers worth up to £55 per week are free of tax and NIC. There are restrictions on the amount of relief for higher earners joining the scheme since 6 April 2011 - the exempt amount for 40% taxpayers is reduced from £55 to £28 per week, and for 45% taxpayers to £25 per week. Only vouchers provided in excess of these amounts need to be declared on the employee’s P11D in section M: ‘OTHER ITEMS (INCLUDING SUBSCRIPTIONS AND PROFESSIONAL FEES)’.

From 5 October 2018, childcare voucher schemes closed to new applicants. In their place, employees may now get ‘Tax-Free Childcare’ by opening a government account to get the 20% top up. Employers’ workplace nurseries will not be affected by the introduction of this Tax-Free Childcare.

Employees that were previously receiving childcare vouchers can’t have both tax relief for the vouchers and benefit from the Tax-Free Childcare account. So as soon as you are notified that an employee has opened an account the vouchers must stop. If you have continued to provide the vouchers to an employee, these must be treated as a non-cash voucher and recorded on the P11D in section C: ‘VOUCHERS AND CREDIT CARDS’.

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