In April 2005 the Government introduced new tax and National Insurance legislation to encourage employers to support working parents by helping them with their childcare costs. From April 2006 the exemption limit was increased

• The first £55 week (£243 per calendar month) of registered or approved childcare paid for under the scheme is free of both tax and National Insurance;
• For a basic tax ratepayer this could be worth up to £962 per annum (assuming NICs of 11%);
• Higher rate taxpayers can save up to £1195 per annum.

The new tax exemption is per employee so both partners are eligible to participate in the savings if their employer offers the Childcare Account scheme or similar. If both parents are basic rate Taxpayers they can save up to £1924, if both parents are higher rate Taxpayers savings of up to £2390 can be made.

The tax exemptions on childcare vouchers apply only in respect of Registered childcare, including childminders, nurseries, after school clubs, crèches and play schemes, or Approved care including nannies and childminders. Relatives will not qualify.