Basic rate taxpayers will continue to be exempt from all tax and National Insurance Contributions but in future higher rate tax payers who currently receive tax relief at 40 per cent will have the benefit halved.
Gordon Brown said this was to ensure that the scheme was fairer for all families.
He had wanted to end tax relief on childcare vouchers from 2015, believing it was badly targeted and that better off families were the main beneficiaries.
From April 2011 higher rate tax payers joining a scheme will be entitled to income tax relief worth exactly the same as basic rate taxpayers.
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