Return to work and energy bill support

In the Spring Budget 2023, the Chancellor announced:

• Free childcare for working parents in England is being expanded to cover one and two-year-olds; and
• The Energy Price Guarantee, which is protecting households by capping typical energy bills at £2,500, will be maintained at the same level for a further three months over April, May, and June, worth £160 in total for a typical household.

We provide a summary update on this below, but also go further to set out other opportunities for individuals and employers to consider.

Extension of free childcare support

Currently, all families with three and four-year-olds qualify for 15 hours of free childcare a week, over 38 weeks, while households can qualify for 30 hours of free childcare if parents earn the equivalent of 16 hours a week at the national minimum or living wage. However, families with children aged one and two do not currently receive support after parental leave ends and before free nursery hours are offered for three and four-year-olds.

From April 2024, working parents of two year-olds will be able to access 15 hours of free childcare per week, benefiting parents of up to 285,000 children. This will be extended to working parents of nine month to two year-olds from September 2024, benefiting parents of up to 640,000 children. From September 2025, all eligible working parents of children aged nine months up to three years will be able to access 30 free hours per week (alongside the arrangements available for children aged four and five).

The plans are part of a government drive to encourage more people back to work to boost economic growth.

Equivalent funding is expected to be announced for Wales, Scotland and Northern Ireland.

Funding support is also being provided to childcare providers and also to encourage more to go into childminding / carer careers. Additionally, there was also an announcement to help those on Universal Credit moving into work with childcare costs by enabling the funding to be available up front.

Childcare costs in the UK are among the highest in the world and the government has been under pressure, including from some of its own MPs, to provide more help for parents. The rising cost of childcare has been widely seen as a deterrent for some parents to go back to work or work full time.

The Government has also “loosened” staff-to-child ratios for two-year-olds, which could make the cost of childcare a little cheaper.

The focus on people, family and care in this Budget is centred around growth. Growth for the economy, growth in employment and growth in social mobility (considering the attention on Levelling Up). The key is to help encourage people to return to work, whether they physically travel to an office, or can work remotely. Having more available childcare that is supported financially by the Government is seen a key driver in getting the economy and individuals “moving” again.

Employer nursery provision

Additionally, there are options for employers to  help employees . One of these is to provide nursery provision which can be tax exempt in certain circumstances and may be relevant to operate on a salary sacrifice basis. However, currently it is difficult for employers to qualify as they need to be able to clearly demonstrate an active and regular involvement in financially supporting and managing the nursery facility, not just paying nursery fees for employees. With rising costs and the need to make savings, as well as attract people back to the workplace, this may be an avenue for employers to explore further, albeit carefully managing tax compliance here.

Individual tax free childcare accounts

Separately, the tax free childcare support scheme continues to be available. Tax free childcare is not an employer scheme – it operates directly between the Government, the parents, and the childcare providers via an online account. The individual applies for this online.

Tax free childcare operates on a per-child basis rather than a per-employee basis. For every 80p the parent(s) pays into a newly-created childcare account, the Government will contribute 20p, up to a maximum amount of £2,000 per child (up to £10,000 can be added to each child’s account).

In summary, any individual parent/guardian or pair of parents needs to meet the following conditions to be eligible for the tax-free Childcare arrangement:

• Initially, only children under the age of five years qualified, but the scheme has now been extended to include children under the age of 12 (they stop being eligible on 1 September, after their 11th birthday) and disabled children under the age of 17.
• To be in work – or getting parental leave, sick leave or annual leave, each earning at least the National Minimum wag (NMW) for 16 hours a week;
• To not be in receipt of any tax credits, universal credits or employer supported childcare;
• To not have individual household taxable income over £100,000; and
• Confirmation of meeting the qualifying criteria every three months, known as the ‘entitlement period’.

Will the Energy Price Guarantee change?

The Energy Price Guarantee, which is protecting households by capping typical energy bills at £2,500, will be maintained at the same level for a further three months over April, May, and June 2023, worth £160 in total for a typical household.

The Chancellor’s three-month extension of the Energy Price Guarantee at £2,500 means households won’t feel the full force of Ofgem’s Price Cap between April and June – which stands at £3,280 – helping to bridge consumers into the summer, which is when lower wholesale gas prices are expected to feed through to lower household energy bills from July. Cornwall Insight data shows the Ofgem Price Cap will reach an estimated £2,100 a year for a typical household, based on current available information.

This should help individuals manage costs for a little while longer.

What more can be done by employers based on what is currently available?

Employers are looking at getting employees physically back in work (i.e. at an office location) or to want to return to work anywhere

In addition to the government’s announcements to support people’s return to work,  employers can look at:

• Making a payment of £6 per week or £26 per month tax/NIC free for those employees who may work regularly from home (say two/three days a week) during their normal working hours. This is a home working allowance payment to help with increased utility costs associated with working at home more. Many employees claimed tax relief during Covid but tax relief is not available for these more hybrid, voluntary arrangements, although employers can make a payment tax/NIC free.

• Providing a loan to help employees update their energy provision at home – this could include solar panels, heat energy pumps etc. Loans are tax/NIC free up to £10,000 and it may help in the longer term, as well as support with recruitment and retention.

• Thinking more broadly, employers can look at vehicle fleets and travel support for employees, including adopting an electric / hybrid car fleet, utilising season ticket loans, making electric bicycles available, providing free car parking spaces and also, going further, looking at providing food/drink in the workplace to support with costs at home.

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