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Childcare Vouchers

Many employers have now signed up to the Childcare Vouchers scheme, which allows parents to sacrifice some of their gross salary in return for “vouchers” that can be used to pay for childcare. The first £55 each week (£243 each month) can be bought free of tax or National Insurance, meaning a lower rate taxpayer could save around £962 per year, and a higher rate taxpayer around £1,195.

Most companies can join the scheme and, so if you haven’t already, it could be well worth asking to see if yours has signed up with one of the voucher providers. However, if you are able to claim benefits, you may find the Childcare Voucher scheme affects these, so look in to your individual circumstances before signing up.

Am I eligible for childcare vouchers?

Any working parent, or those with parental responsibility for a child living with them, is eligible for childcare vouchers. The vouchers can be used by a non-working partner as well. So if one parent takes up the vouchers, for example, the stay-at-home partner can use the vouchers to pay for approved childcare provision.

How do I claim childcare vouchers?

Childcare vouchers are only available through your employer who must run a voucher scheme.

How does the scheme work?

Childcare vouchers can be provided as an additional benefit or reward on top of an employee’s salary, however, the majority of schemes are offered via salary sacrifice. This means that they are offered to employees as a voluntary benefit, with the employee converting part of their salary into vouchers.

You can choose to take childcare vouchers up to the value of £2,916 p.a. per person as part of your remuneration package, as long as your cash salary is not reduced below the minimum national minimum wage. This means that if you elect to accept childcare vouchers as a portion of your salary, you will not have to pay national insurance contributions (NIC) or tax on up to £55 per week on the vouchers. This is known as salary sacrifice.

Who can I pay with childcare vouchers?

Childcare vouchers cover childcare up to the age of 15 and can be used as full or part payment for any of the following:

  • Day nursery   
  • Pre-school playgroup          
  • Out of school club    
  • Childminder

To benefit from the tax and NI exemption, your chosen childcare provider must be registered with the Care and Social Services Inspectorate Wales (CSSIW).

Frequently Asked Questions for employees about interaction of Tax Credits and Childcare Vouchers.

HMRC – Childcare Vouchers

Fideliti Childcare Vouchers

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