Families suffer voucher confusion

07/12/2009

Reforms to the childcare voucher system will have knock-on effects for many households, it has been suggested.

Reports last week indicated that the government is planning to reduce the tax relief offered by childcare vouchers to some higher income families.

However, the Low Incomes Tax Reform Group (LITRG) has claimed in new analysis that some poorer households would be "better off" taking out tax credits instead.

The current system allows employers to give relief worth £55 per week to workers, which can then be used to offset childcare costs.

LITRG said that some families should avoid the vouchers and have the full costs subsidised via tax credits.

An example used by the group indicated that a household with £155 per week childcare costs which took £55 in vouchers could only claim £100 childcare costs when using tax credits.

However, LITRG said that many people - including those on the higher rate of income tax, those whose costs exceeded £175 per week for one child and those who are not eligible for the credits in the first place - derived more benefits from vouchers.

John Andrews, the group's chairman, said: "There is precious little information to help people make the right choice between vouchers and tax credits.

"Both the government and the voucher companies are failing to provide people with the information they need to make the right decision for themselves."

An update child voucher plans will be delivered during the Pre-Budget Report, which is delivered to parliament on Wednesday (December 9th).

Tags; Current UK Economy, Young Family Finances,

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