Government 'plans to end childcare tax break'

Date: 14th October 2009

New government plans to provide free childcare for 250,000 two-year-olds from low to middle incomes could lead to the removal of a tax break from other households.

The proposals, unveiled by prime minister Gordon Brown in his party conference speech last month, are likely to be paid for by the scrapping of taxation relief on the employer-supported childcare scheme.

This is a tax break worth £55 each week targeted at working parents who need childcare during the day.

It works by the parents giving up part of their salary in order to pay for the service, but avoiding tax on this sacrifice.

Employer-suppported childcare is likely to be phased out entirely within six years.

Commenting on the planned changes, accountants Mazars stated: "Obviously we will need to see what details are included within the Pre-Budget Report, however both employers and their employees will be concerned by the loss of this highly favourable tax and National Insurance exemption.

"It is important for employers to consider the impact of these changes on their future reward strategy for their employees and how policy may be adapted to meet these changes."

Criticism of the plans was also offered by lobbyist Margaret Morrissey at Parents Outloud.

Speaking to the Daily Mail, she commented: "Are we actually going to make it worse for parents?

"We need to know how many parents in this country are going to end up paying far more for childcare."

Additional information about the proposals is expected to be included in the chancellor of the exchequer's November Pre-Budget Report.