The final sacrifice: childcare vouchers to be axed

The tax exemption on employer-provided childcare vouchers may well be axed in the forthcoming Pre-Budget Report. This may well serve to reduce the appeal of many salary sacrifice schemes.

The loss of a favourite tax-free perk, if the Institute of Chartered Accountants in England and Wales (ICAEW) are correct in their appraisal in this months’ Taxline magazine, follows the announcement in the Prime Minister’s speech at the recent Labour party conference that free nursery places would be extended to include two year olds. Such a scheme would need funding and so tax relief on the first £55 per week of childcare vouchers would go. 

The ICAEW says that it understands that from April 2011 employees who join an employer supported voucher scheme will not be entitled to the existing tax and NICs exemptions, although existing recipients will be unaffected until April 2015. 

Source: ICAEW Taxline