The interaction of employer provided childcare vouchers and Scottish Income Tax

28 March 2018

Eligibility criteria for employer provided childcare vouchers are not devolved to the Scottish Parliament and, therefore, the basic and higher income tax rate limits apply for all employees in the UK.

The CIPP’s advisory service has been receiving several questions from members about the annual assessments for childcare vouchers in regard to Scottish employees. So for clarification, and as stated in HMRC’s EIM (Employment Income Manual):

‘Basic rate limit and higher rate limit refers to the UK rates as defined in S10 (5) and (5A) ITA 2007 (Income Tax Act 2007). This means the same limits apply for all employees in the UK.’

The 20% rate for Scotland is still being classed as the basic rate despite a lower rate of 19% being introduced for the 2018-19 tax year. Various calculations are operated around the basic rate so the earnings assessment for childcare vouchers will be unaffected as it is based on the rUK rates and thresholds.