Parents could face losing out on almost £2,000 a year if they fail to renew their childcare vouchers by the looming October deadline.
The government scheme was scrapped for new joiners from 4 October last year, but around 780,000 parents still make use of the vouchers, according to the Childcare Voucher Providers Association.
A month to renew
Parents who use the scheme have just over for weeks left to renew their vouchers or face losing out on the perk.
Providing your employer still offers the vouchers - and you don't leave the company or take an unpaid career break of longer than a year - you can continue using the scheme by renewing the vouchers once a year.
But if they aren't renewed by the deadline (Fri 4 Oct 2019), parents will miss out on vouchers which are worth up to £1,866 per year and will lose their eligibility to receive them again.
In place of childcare vouchers, the government introduced tax-free childcare to help parents cover costs.
Vouchers vs tax-free childcare
Parents who use childcare vouchers effectively give up some of their salary in exchange for vouchers from their employer to cover childcare costs. Only one parent needs to work to qualify for the vouchers, with the amount you can claim dependent on your tax rate, and it is valid for children aged up to 15.
By comparison, tax-free childcare permits parents a 20 per cent discount on childcare costs of up to a maximum of £2,000 each year per child.
The scheme is open to working parents, including those who are self-employed, who together earn between £6,830.72 and £100,000 per year, and have children aged between 0 and 11 years old.
Becky O’Connor, personal finance specialist at Royal London, told The Sun, "When comparing which scheme is best for you, think about future childcare needs as well.
"Tax-free childcare is often better value in the pre-school years when costs are highest, but once children are at school, vouchers tend to work out best to pay for things such as after-school clubs and holiday clubs.
"Also vouchers last until a child turns 16, whereas tax-free childcare only goes up to 11."
Which scheme is best?
Both childcare schemes have their merits, but one may benefit some parents better.
Childcare vouchers would be the best option if:
- Only one parent works
- Parents earn less than £6,830.72 per year, or more than £100,000 per year
- Parents have childcare costs for children aged 12 to 15
- Basic rate taxpayer parents with childcare costs of £9,336 or less per year
Alternatively, tax-free childcare would be the best option for:
- Self-employed parents
- Parents with a large number of children
- Basic rate taxpayer parents with childcare costs of more than £9,336 per year