How do childcare vouchers work and what are childcare vouchers?
Childcare Vouchers are an employee benefit that many businesses offer to their staff. It means that the employer can pay for the childcare and take the costs from the gross wages of the employee. This means that you save the tax and national insurance on your childcare costs. This scheme gives working parents a valuable discount on their childcare costs.
A childcare voucher scheme will typically save parents in excess of £900 per year, for a basic rate taxpayer, and over £600 for a higher rate taxpayer. This can be a real help paying for childcare.
What is salary sacrifice and how does salary sacrifice work with childcare costs?
When we are paid a salary we earn our money and then pay tax and national insurance. By having a salary sacrifice scheme your employer will effectively pay you slightly less and then pay the nursery direct. Because you have been paid slightly less you pay less tax and national insurance and so actually end up with more net income after childcare costs.
Childcare voucher example calculation
If you earn £25,000 per year and you wanted to take the maximum advantage of the childcare vouchers you would see a salary reduction to £22,084. However, your employer will pay £2,916 worth of childcare costs and you would be taxed on £22,084, not on £25,000. So the savings are significant.
How do you claim or apply for your childcare vouchers?
Your employer will need to sign up for a voucher scheme such as Edenred, Busy Bees, Fidelity, Sodexo, Computershare or Kiddicare. There are of course other schemes available. All the schemes work in a very similar way and We accept all types of childcare vouchers. You will normally need to complete an agreement with your employer to take advantage of childcare vouchers. Don’t forget that mums or dads are eligible to apply for childcare vouchers.
Am I eligible for childcare vouchers?
Firstly, you will need an eligible child, to receive childcare vouchers your child must be your child, your stepchild or a child that lives with you or that you have parental responsibility for.
How do I sign up for childcare vouchers?
Firstly, find out if your employer offers a childcare voucher scheme. If they do complete an agreement with them and then request the value of childcare vouchers that you need.
What if my employer doesn’t offer a childcare voucher scheme?
You can request that your employer offers a scheme although they are under no obligation to do so. Perhaps suggest to them some of the providers we have listed above. Don’t forget to tell your employer that they make savings on their National Insurance contributions too!
Will choosing Childcare Vouchers have an effect on the tax credits I receive?
If you receive the childcare part of working tax credits, which is designed to provide childcare support, this is likely to be affected. HMRC do have a calculator you can use to check.
Can self-employed people claim childcare vouchers?
If you are working within a limited company and you pay tax and Class 1 National insurance, you are likely to get childcare vouchers. If you are self-employed and do not get paid by PAYE then it is unlikely.
Do I get childcare vouchers while on maternity leave?
This is down to your individual employer and you should check directly with them.
Please note: If you are paying by voucher, then please let us know the company you are using and ensure that your child’s name is used as the reference when the payment is made and please make sure to pay by 25th of every month and we accept all major vouchers. If the voucher does not cover the entire fee, then any balance will be collected by direct debit. Please remember that both parents/carers are entitled to redeem the voucher.
