Childcare Vouchers is a scheme some employers offer to help working parents save on registered childcare costs. Childcare vouchers are available to all working parents whose employers operate childcare voucher schemes. The vouchers can be used to pay for all types of registered childcare including day nurseries and out of school hours clubs and the value is tax and NI exempt.
How it works :
1. In addition to salary
This pays an amount on top of your existing salary. It is the most beneficial to you, as you benefit from the employers’ subsidy, as well as the tax and NICs exemptions. This costs more to the employer.
2. Salary sacrifice
This is where an employee gives up salary in exchange for the employer contributing an equivalent amount to a childcare place or a childcare voucher.
Using employer provided childcare vouchers to pay towards your childcare costs allows Tax and NI savings.
For 2016/17 the Tax and NI free allowance for basic rate tax payers is £55 per week, or £243.00 per month, per parent.
For those joining the scheme now, savings for the 2016/17 tax year of up to approx £900 per year per parent can be made.
Gable House Nursery accepts all childcare vouchers. If your employer doesn’t operate a scheme, ask them if they will.
Your entitlement to tax credits, however, is likely to be affected. This is because you can only claim help through the childcare element of Working Tax Credit on childcare costs that you meet yourself. If your employer meets any of your childcare costs, even if your pay has reduced in return (a salary sacrifice) these costs do not count.
From 2017 the voucher scheme is changing although if you are already using the current scheme you can continue to do so. Depending on your circumstances, it could be beneficial to start using a voucher scheme now.
Click HERE for information on a typical voucher scheme.
Tax Free Childcare
Tax-Free Childcare is a new government scheme to help working parents with the cost of childcare.
Parents will be able to open an online account, which they can use to pay for childcare from a registered provider.
For every £8 a parent pays in, the government will pay in an extra £2. Parents can receive up to £2,000 per child, per year, towards their childcare costs, or £4,000 for disabled children.
The scheme will be available for children up to the age of 12, or 17 for children with disabilities.
To qualify, parents will have to be in work, and each expecting to earn at least £115 a week. Each parent must not have income over £100,000 per year.
Tax-Free Childcare scheme launch to parents
Tax-Free Childcare will be launched from early 2017. The scheme will be rolled out gradually to families, with parents of the youngest children able to apply first.
Parents will be able to apply for all their children at the same time, when their youngest child becomes eligible. All eligible parents will be able to join the scheme by the end of 2017.
Click Here for more information.