How does the reversal of the increase to National Insurance affect Childcare Vouchers?
In the ‘mini budget’ on Friday 23 September, the Chancellor announced a reversal in the 1.25% rise in the National Insurance rate, which had been introduced from April 2022. This will now be scrapped and the rate of National Insurance will revert back to what it was before April 2022 (12%).
This will be good news for employees as it means that there is more take home pay left after deductions. However, it also has the effect of reducing the savings that parents can make through using Childcare Vouchers back to what they were prior to the rise in National Insurance.
From 6 November 2022 the rate of National Insurance will fall from 13.25% to 12%. Childcare Vouchers allow eligible parents to sacrifice up to £243 per month of their salary, tax and National Insurance exempt, to pay their childcare costs for children under 16 (17 for children with disabilities). This change therefore reduces the maximum savings amount from £969 to £933 per year, per parent, meaning parents save slightly less money on their childcare costs. However, this lower amount of savings is the maximum amount that could have been saved for many years prior to April 2022.
The other change to National Insurance which took effect from July 2022, increasing the threshold to start paying National Insurance to £12,570, is not affected by this announcement.
The Childcare Voucher scheme closed to new entrants in October 2018. Any parents currently in the scheme can continue to use it provided they make at least one salary sacrifice in every 52 week period and do not change employer. Parents must also be earning more than the National Living Wage. In some cases Childcare Vouchers can be claimed alongside Universal Credit or Tax Credits. For those parents who are not eligible for Childcare Vouchers, other forms of financial support with registered childcare costs are available and our team can advise what is best for your family.
For further information
For more information on Childcare Vouchers refer to our website, or contact the Family Benefits Advice Service to ensure that you are receiving the best form of support towards your registered childcare costs. To speak to an advisor call the Family Benefits Advice Service on 028 9267 8200 or email hello@employersforchildcare.org.
