Employees can buy childcare vouchers to use to pay for childcare in a tax efficient way by sacrificing their salary. Eligible employees do not pay income tax or national insurance contributions on the amount sacrificed. They receive tax exempt vouchers provided that they remain with the same employer, the employer continues to run the scheme and the employee does not take a break from receiving the vouchers for one year or more. Existing childcare schemes were supposed to close to new entrants from April 2018. However, the government has now delayed this until 4 October 2018. Eligible employees can continue to sacrifice salary for childcare vouchers.
Employees who are not eligible can instead take part in the replacement tax-free childcare voucher scheme. This does not involve salary sacrifice and has different eligibility rules.