As the kids go back to school, parents across the UK will be breathing a huge sigh of relief – with the last minute rush to get new uniforms, shoes, and stationery, you may also be a feeling a little weary and a whole lot poorer.
And as if the cost of all that wasn’t enough, many have the extra cost of after school clubs and breakfast clubs! That’s where Childcare Vouchers come in – not only can they be used to help towards nursery fees, but you can benefit from the scheme until your child reaches 15 (16 if they’re disabled). Let’s take a look at how Childcare Vouchers work.
How do Childcare Vouchers work?
The government’s Childcare Voucher Scheme enables parents to save money on their childcare costs by paying for childcare from their gross salary, and therefore making a tax saving.
As defined by the government, a child qualifies up to 1 September following their 15th birthday. The child must be the child or stepchild of the employee or a child for whom the employee has parental responsibility. The childcare provider must be registered and this can include nurseries, childminders, and nannies/au pairs.
If your employer offers the scheme, and you’re eligible, as a basic rate taxpayer you can each pay £243 a month from your salary (known as salary sacrifice) into the scheme. Tax and NI deductions are then taken as normal from the remaining salary, giving you a tax saving. Depending on your tax bracket and other factors, you could save £933 a year through the scheme, and you can double that if both parents sign up.
Salary sacrifice schemes can affect benefits and some loan applications. As Childcare Vouchers can affect your Tax Credits, you should refer to the HMRC calculator before signing up for Childcare Vouchers, to check if you’d be better off. Please refer to up to date HMRC guidelines for full details for your individual circumstances.
Don’t miss out!
The Childcare Voucher Scheme will only be open to new joiners until April next year, as the government has introduced a new scheme to help with childcare costs. Known as the ‘Tax-Free Childcare’, for every £8 you pay in, the government will top up with an extra £2. Not everyone will be better off using this scheme, so to find out what’s best for you, you should refer to HMRC.
Childcare Vouchers for Contractors
Childcare Vouchers are administered by your employer, so how does that work if you’re self-employed? Don’t worry, as a contractor you shouldn’t miss out – if you’re employed by an Umbrella provider they should run a scheme – so you can still benefit from this tax-saving.
To find out more, visit Childcare Choices.
For more information on the benefits of our Umbrella Solution, give us a call on 0800 731 3178.