Two new initiatives in the Budget to help with childcare costs could reduce complexity for parents and their employers, but only if they are developed together, say the Low Incomes Tax Reform Group (LITRG).
One of the initiatives would provide support via a state subsidy of 20% of eligible childcare costs, the other through an improvement to the childcare provision in universal credit.
Robin Williamson, Technical Director of LITRG, explained:
“We regard it as essential that the two new schemes are developed in tandem to ensure easy interactions between the two. A significant weakness of the existing childcare support schemes – in working tax credit and through employer-provided tax-free vouchers – is the fact that they are disjointed. Working families need to undertake complex calculations to see which works best for them. For that reason we regard the single consultation process, dealing with both together, as a welcome move.
“We also welcome the wide reach of the proposals. Many more families will benefit from the new schemes together than from the current combination of working tax credit and employer-provided tax and NI free childcare vouchers. The new proposals should also be simpler than the current voucher system, which struggles to limit relief to the basic rate for those on higher incomes
“If the Government succeeds in reducing complexity in childcare schemes and thereby delivering effective work incentives, it will have made a worthwhile contribution to the finances of working families.”
Notes for editors
The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.
The CIOT is a charity and the leading professional body in the United Kingdom concerned solely with taxation. The CIOT’s primary purpose is to promote education and study of the administration and practice of taxation. One of the key aims is to achieve a better, more efficient, tax system for all affected by it – taxpayers, advisers and the authorities. The CIOT’s 16,500 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’.
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