8 December 2012 by Crystal HR & Payroll Ltd
What are Childcare Vouchers and How to Claim Them?
A number of clients have been asking us about Childcare Vouchers.
Here are some of the questions and answers:
- How does the scheme work?
Most employers choose to operate their childcare voucher scheme via ‘salary sacrifice’. As long as your cash salary does not go below the National Minimum Wage, you can choose to take Childcare Vouchers up to the value of £2,916 a year as part of your package. If you accept Childcare Vouchers as a portion of your salary (up to £55 per week or £243 a month) you do not have to pay National Insurance Contributions (NIC) or Tax on that amount.
- How do I save money?
If you choose to have some of your salary paid as either paper or electronic Childcare Vouchers (up to £55 per week or £243 a month), you don’t pay tax or NICs on that amount. So your remaining wages are greater after paying for your childcare with vouchers than if you had paid in cash.
- How much can I save?
Each parent that takes their maximum allowance can save up to £1,196 per year. Exactly how much you save depends on how much tax and National Insurance you pay.
- Is my partner able to receive vouchers as well?
If your partner also works for an organisation that runs a childcare voucher scheme, your family could make double savings if you both join your employer’s childcare vouchers scheme. This is because tax and National Insurance contribution exemption applies to each employee, not the number of dependent children you have.
- Do Childcare vouchers cover children of any age?
You can use Childcare Vouchers for children up to the age of 15 (until 1st September following their 15th birthday), or 16 if they are disabled (until 1st September following their 16th birthday).
- Who can I pay with Childcare Vouchers?
You can use Childcare Vouchers as full or part payment for a:
- Day Nursery
- Nursery School
- Playgroup / Crèche
- Holiday scheme
- Qualified nanny / Au pair
- Out of school club
- Holiday Play Scheme
To benefit from the Tax and National Insurance exemption your childcare provider must hold either a current registration certificate (with a unique reference number (URN) or an approval certificate with an expiry date and reference number.
Recognised approval organisations include:
- Ofsted Childcare Register – Compulsory (England)
- Ofsted Childcare Register – Voluntary (England)
- Local Health and Social Services Trusts (Northern Ireland)
- The Care Commission (Scotland)
- Childcare Appoval Scheme (Wales)
- The Care Standards Inspectorate (Wales)
Can I use my vouchers to pay for more than one of my children?
Yes, vouchers are not specific to any one child.
- Does having a deduction from my salary for Childcare vouchers affect my tax or my pension?
Being eligible for some state benefits (eg Statutory Sick Pay and Job Seekers Allowance) relies on you paying a minimum level of National Insurance Contributions. The scheme therefore does not permit your income to fall below the NI earnings threshold.
For company contribution pension schemes the policy may vary from organisation to organisation.