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Most families worse off under Tax-Free Childcare scheme

Tax-Free Childcare is due to roll out from early 2017, slowly phasing out childcare vouchers by April 2018

Almost two-thirds of UK families (64%) will be worse off under the government’s incoming Tax-Free Childcare scheme compared with the existing employer-led childcare vouchers system, according to research by Sodexo Benefits and Rewards Services.

Tax-Free Childcare is due to roll out from early 2017, slowly phasing out childcare vouchers by April 2018. The research found that 82% of basic tax rate households with one child will be worse off once the transition is complete.

Additionally, nearly six in 10 (56%) single-parent families will be worse off, as well as 63% of working couples with one or more children.

According to the research only higher rate taxpayers with two or more children will be better off using Tax-Free Childcare than childcare vouchers, with 80% benefiting from the system.

Iain McMath, CEO of Sodexo Benefits and Rewards Services, warned that Tax-Free Childcare is going to have a serious impact on most families’ finances come 2018. “Unfortunately it is those who are most in need of government support that are set to lose out: single-parent families and those paying basic-rate tax,” he said.

“Many parents still don’t realise that this change is being implemented, and there is very little information available about Tax-Free Childcare for those who are aware. While the new scheme is designed to encourage parents back to work, in reality this will not be the result.”

Will Hadwen, rights adviser at Working Families, said employers should support staff to juggle childcare and work in light of the above.

“We have a patchwork of support with childcare costs that is tricky for working parents to navigate,” Hadwen told HR magazine. “Not all families will benefit from the new Tax-Free Childcare scheme and not all families are able to benefit from the childcare voucher scheme.

“We’d like to see a continuing role for employers in supporting staff to balance work and care, and better help with childcare costs for self-employed parents. Clear information from the government to help parents find the best solution for their needs as changes come into effect is vital.”