| In 2009 the government
announced changes to employer supported
childcare and HMRC have now issued further
guidance on the changes.
The amount of tax free childcare
vouchers and directly contracted childcare
for employees joining an employer's scheme
will be restricted in cases where an
employee's earnings and taxable benefits
are liable to tax at the higher or
additional rate.
Anyone already in a scheme by 5 April
2011 will not be affected by these changes
as long as they remain within the scheme.
From 6 April 2011, employers who
provide employer-supported childcare will
be required, at the beginning of the
relevant tax year, to estimate the level
of employment earnings that their employee
is likely to receive during that year,
ignoring potential bonus and overtime
payments, but including other known
taxable benefits.
If the level of estimated earnings and
taxable benefits is equal to or below the
equivalent of the sum of personal
allowances and the basic rate limit for
the year, the employee will be entitled to
relief on £55 exempt income for each
qualifying week. This is the same as the
current amount.
If the level of estimated earnings and
taxable benefits exceed the equivalent of
the sum of personal allowances and the
basic rate limit for the year, but falls
below the limit at which tax becomes
payable at the additional (50%) rate limit
for the year, the employee will be
entitled to relief on £28 exempt income
for each qualifying week.
If the level of estimated earnings and
taxable benefits exceed the equivalent of
the additional (50%) rate limit for the
year, the employee will be entitled to
relief on £22 exempt income for each
qualifying week.
If you would like to review your
childcare provision options in light of
the above please do get in touch.
Internet link:
HMRC childcare |
