In the week that parents earning over £50,000 saw their child benefit cut, the speculation is that the government intends to introduce tax relief for childcare, possibly making those who were worse off from the child benefit change, better off once again. In the absence of an announcement from ministers, we will not know what the government actually intends to do until next week’s announcement. But the talk is of the introduction of basic rate tax relief for childcare worth £2,000 a year per child. How the scheme will work is anyone’s guess but, even without the details, we can already speculate that this is a policy that is likely to help the better off more than the ‘strivers’ the government says it supports.
The government already spends £700m a year on tax relief for childcare through employer supported childcare vouchers which look likely to be scrapped following the introduction of tax relief. It’s a voluntary scheme that employers can offer which gives their employees basic rate tax relief on £55 a week of childcare costs (less if they are a higher rate taxpayer). Resolution Foundation analysis shows that 50 per cent of people who used vouchers in 2010-11 were in the top 20 per cent of households (see graph). Almost no voucher recipients were found among the poorest 40 per cent of households.
Content from our partners
