Tax relief on childcare vouchers is being restricted for higher rate tax payers from 6 April 2011. The monthly limit for tax-free vouchers will be reduced from £243 to £124 for higher rate (40%) taxpayers and to £97 for additional rate (50%) taxpayers. There is no change for basic rate taxpayers.
The change applies only to new joiners to the childcare voucher scheme after 5 April 2011. Anyone already registered with the scheme before that date can continue to claim at the existing monthly rate of £243, even if they are higher rate taxpayers.
It is in the interests of staff who are higher rate tax payers and have a child born before 6 April 2011 to register for childcare vouchers as soon as possible, even if they do not immediately intend to claim these. Provided that staff begin claiming for childcare vouchers before 5 April 2012, their tax position will be protected for subsequent tax years. Managers should pass on this information to any staff currently on maternity leave who could benefit.
More information on maternity pay, childcare vouchers and income tax is available here