Childcare Voucher Schemes are a way for employers to help their staff pay for registered childcare.
Who can get vouchers?
Anyone who is working and has parental responsibility for a qualifying child can take part in a childcare voucher scheme, even if the child does not live with them.
Couples with parental responsibility for the same child can both take part in the scheme and double their savings.
When does a child qualify?
A child qualifies up to 1 September following their 15th birthday, or 1 September following their 16th birthday if they have a disability.
How does it work?
Employers can give you childcare vouchers worth up to £55 a week (or £243 a month) if you are a basic rate taxpayer, or £28 a week (or £124 a month) if you are a higher rate tax payer, this is also free of income tax and National Insurance contributions (NICs).
This means that if you are a basic-rate taxpayer you could save around £900 a year and if you are a higher rate taxpayer you could save around £600 a year. If the vouchers are worth more you must pay tax and NICs on the extra.
You may be asked to have a reduction in your salary in return for the value you receive in childcare vouchers. This is called salary sacrifice and will legally change the terms and conditions of your employment contract relating to your pay.
Tax credits and statutory benefits, such as statutory sick and maternity pay, may be affected if you do this because of the way they are calculated.
Salary sacrifice can also affect company pension schemes. Talk to your employer or your pension scheme operator about this. Find more information about salary sacrifice on gov.uk website.
You can’t choose to sacrifice part of your salary if it would make your rate of pay below the national minimum wage.
If you are entitled to the childcare element of the Working Tax Credit receiving childcare vouchers will reduce the amount of tax credit you get. Use the online calculator to work out if you would be better off getting tax credits or childcare vouchers.