Government Backs Down over Childcare Voucher Tax Relief – Finance News
The Tax relief that was given to parents receiving childcare vouchers was saved this week after Gordon Brown gave in to pressure from various Labour backbenchers to keep the relief which is worth up to £2,300 a year for 340,000 families around the UK.
The vouchers allow parents to exchange up to £243 of their income for child care vouchers that aren’t subject to either income tax or national insurance payments, a 31% tax break on the money.
Instead, the relief will be applied to those on the standard 20% income tax rate at a cost of hundreds for parents who earn more than £43,000 and are on the 40% income rate tax band.
The back down was welcomed by childcare campaigners but was countered by the conservatives who saw the U-turn as evidence that the governments childcare system was in chaos. The change to the scheme won?t actually change anything for anyone until 2011.
Brown had initially announced he was scrapping the relief to fund new nursery places and argued that the wealthiest users gained a majority of the benefit form a tax relief. However, the Prime Minister was faced by a joint letter from several prominent back benchers and a petition of 92,000 people on the Downing Street website.
After failing to maintain a stable majority in commons over the matter, Brown stated in a letter to the rebellion backbenchers:
“…We will retain tax relief for new childcare vouchers issued in the future. However, there still remains a concern that a disproportionate benefit is accruing to higher rate taxpayers. So to ensure this tax relief is given on a fairer basis to all families, we will ensure all taxpayers get the same income tax relief as basic rate taxpayers do currently.”
However, the Conservatives believe that Labour had shown that they demonstrated ?neither consistency nor honesty? on their policies toward childcare.