Employers should remind working parents that they can reduce contributions into the childcare voucher scheme while they work from home.
Since the start of the COVID-19 pandemic, many employees have been working from home and have used less paid childcare due to lockdown restrictions forcing nurseries and after or before-schools clubs to close.
Subsequently, HMRC has said that existing users of the childcare voucher scheme are racking up unspent childcare vouchers in their voucher accounts via salary sacrifice.
In its bi-monthly employer bulletin, HMRC said:
"Can you remind your employees that they can reduce their contribution by speaking with you and agreeing to a new lower amount (both the employer and employee must consent)?
"Contributions can be increased again later when required and varying the amount will not affect eligibility to the scheme, provided that the normal conditions of the scheme are met."
Childcare vouchers
The childcare voucher scheme closed to new applicants on 4 October 2018, but many parents continue to contribute up to £55-a-week via salary sacrifice.
How much working parents can put into their childcare voucher account depends on the amount they earn and when they joined the scheme.
Those that joined the scheme on or before it closed will keep getting vouchers or directly-contracted childcare as long as:
their wages were adjusted on or before 4 October 2018
they stay with the same employer, who continues to run the scheme they do not take an unpaid career break of longer than a year.
The childcare vouchers are not liable for income tax or National Insurance contributions (NICs). Tax and NICs must be paid if an employer gives cash to pay for childcare costs, including a childcare provider's fees or school fees.
Tax-free childcare
HMRC also said that employees receiving childcare vouchers via a salary sacrifice "may wish to check they aren't better off financially on tax-free childcare".
Through this scheme, you can get up to £500 every three months (up to £2,000 a year) for each of your children to help with childcare costs.
For parents with disability children, the amount goes up to £1,000 every three months and to £4,000 a year.
The scheme works through an online childcare account for your child, with the Government contributing £2 for every £8 you pay for childcare.
You can get tax-free childcare at the same time as 30 hours' free childcare if you're eligible for both and you use it to pay for approved childcare, including childminders, nurseries, nannies and after-school clubs.
Eligibility and how much you can get depends on whether you are in work, your income, your child's age and circumstances, as well as your immigration status.
You can use HMRC's calculator to find out exactly how much you could receive.
Get in touch to discuss tax-free childcare.
