Childcare Vouchers

The Facts

Childcare vouchers are a form of ‘Employer Supported Childcare’, a voluntarily scheme which employers can provide for their employees to help towards the cost of childcare.The facts

The childcare provider must be registered or approved by Ofsted. This includes nannies, nurseries, child-minders and crèches. Nannies need to be Ofsted registered through the voluntary Ofsted Childcare Register (vOCR).

Childcare vouchers are available to use up until 1 September following the child’s 15th birthday or until 1 September following his or her 16th birthday if he or she is disabled.

If both the parents’/guardians’ employers provide childcare vouchers both can take advantage of the scheme. Therefore a couple can collectively receive up to £486 (£243 each) of childcare vouchers per month.

The vouchers do not have to be used up immediately.

How does it work?

Most employers process childcare vouchers through the Salary Sacrifice scheme. This is where the employee agrees to forego part of their salary in exchange for the childcare voucher.

Even though the employee receives slightly less net pay, money is saved as the value of the childcare voucher is tax free (the value of the childcare voucher is taken off the gross salary before Tax and NI is deducted).

What is the value of the childcare voucher?

The value of the childcare voucher depends on when the employee joined the scheme.

Any employee who joined the scheme on or before 5 April 2011 can claim up to £55 per week (£243 per month) of childcare vouchers, regardless of salary.

However, if the employee joined the scheme after 6th April 2011 the value of the childcare voucher is dependent on the salary plus any taxable benefits received.

If the salary plus any taxable benefits:

Does not exceed £42,475 per annum then £55 per week (£243 per month) of childcare vouchers can be claimed.

2. Is greater than £42,475 per annum but less than £150,000 per annum, then £28 per week (£124 per month) of childcare vouchers can be claimed.

Is greater than £150,000 per annum, then up to £22 per week (£97 per month) of childcare voucher can be claimed.

What is the saving?

Below is an example that demonstrates the amount saved when an employee utilises childcare vouchers.

This example is based on a gross salary of £25,000 per annum and illustrates that childcare vouchers can save an employee £77.76 per month, £933.12 per annum.

QUICK CALCULATIONS

Without childcare vouchers

Gross salary per month £2083

Net salary per month £1628

(the amount in bank account every month)

Childcare costs per month £700

Left with £928

With childcare vouchers

Gross salary per month

£2083

Taxed on

£1840

(the value of the voucher has been subtracted before Tax and NI have been deducted)

Net salary per month £1462
Childcare costs after the voucher has been deducted £457

Left with £1005

The Quick Calculations shown above are based on the 2012/13 tax year’s standard tax code and are used for example purposes only.

This information is provided by Nannytax as guidance for inhouse use only by nanny agencies. Agencies may view and download Nannytax’s materials for reference in their agency dealings with their clients and nannies but material should not be distributed to nanny employers or nannies. The copyright, trademark or other notices contained in the original material must be kept on anything downloaded and should not be altered in any way. This material should not be reproduced or altered without the prior written consent of Nannytax and material should not be used in a misleading context. Every effort has been taken to ensure this information is accurate and up to date however, Nannytax will not be held responsible for any loss, damage or inconvenience caused as a result of any inaccuracy, error or omission.

This factsheet was last updated in December 2012.