What Are Childcare Vouchers?
Childcare vouchers can be used to pay for childcare. You can gain childcare vouchers along with your salary as part of a salary sacrifice scheme or a salary plus scheme.
How Do They Work?
The working of childcare vouchers can vary depending on the deals offered by employers. Some employers make deals with childcare voucher companies to supply childcare vouchers, other employers run their own schemes. However you have been supplied with childcare vouchers you will be able to use them in payment for childcare. The childcare provider can take the voucher from you and claim the payment detailed on the voucher directly from the organisation who gave you the voucher.
What Savings Can I Make?
Taking payment in childcare vouchers will stop you having to pay tax and national insurance on any amount up to £55 per week (£243 per month). This is likely to save you money on childcare. If you are a lower-level tax payer you could save more than £962 per year, this figure rises to £1,195 for higher rate tax payers. If partners join a voucher scheme, allowing you to gain twice the amount of savings.
Those earning below the tax bands do not benefit from tax savings with a employer-supported childcare. Those who earn below the primary threshold for National Insurance Contributions do not benefit from National Insurance Contributions savings.
How Much Can I Receive in Vouchers?
There is no upper limit to what you can receive but you can only claim tax and National Insurance exemptions on the first £55 per week. If you take a salary cut to allow for your vouchers you are not allowed to fall below the minimum national wage.