What is the monthly equivalent for childcare vouchers from 6 April 2006?

In his Budget statement the Chancellor announced that the weekly exempt amount for childcare vouchers (and other directly contracted childcare) would be raised by 10% from £50 to £55 per week with effect from 6 April 2006.

The equivalent monthly amount will be £243. This has been calculated on the basis of 53 weeks x £55 divided by 12 and rounded up to the nearest whole pound.

For 2005/06, the figure of £217 was used as a monthly equivalent and was based on the legislative formula for calculating the lower earnings limit for National Insurance purposes for someone who is paid monthly (with the result rounded up). This method was agreed with childcare voucher organisations and representative bodies prior to its announcement.

As the tax and NICs exemptions are now nearly a year old, as part of our on going commitment to evaluating this reform, we are reviewing our childcare guidance. Our view now is that the monthly figure could also be calculated by reference to 53 weeks instead of 52. As this method would be in employers' and employees' favour, we will adopt this method of calculation for 2006/07 onwards.