Many parents are missing out on help with childcare costs from their employer, either because their employer doesn’t offer childcare vouchers or because the parents aren’t aware of them. So how do they work?
Childcare vouchers: the basics
Employers don’t have to offer any help towards the cost of childcare, but quite a few choose to do so. This is how childcare vouchers work:
1. Childcare vouchers can be used towards the cost of childminder, nursery etc. The childcare you choose must be ‘qualifying’, which means it has to be registered.
SAVVY TIP: Some types of childcare have to be registered (such as childminders and nurseries). In this case, they must register with Ofsted in England, Care and Social Services Inspectorate in Wales and Social Care and Social Work Inspectorate in Scotland. Other childcare providers (such as nannies and au pairs) can choose to register, which is useful if you’re getting childcare vouchers, but don’t have to do so in order to offer childcare.
2. You can receive up to £55 a week without having to pay tax and National Insurance. If you joined your employer’s scheme before April 6th 2011, you can get up to £55 each week, or £243 each month free of tax and National Insurance. If you joined your employer’s scheme on or after April 6th 2011 you can still get up to £55 each week free of tax and National Insurance if you’re a basic rate taxpayer.
SAVVY TIP: If you’re a higher rate taxpayer (40%) and registered after April 5th in 2011, you can only get £28 a week or £124 a month free of tax and NI. If your employer provides childcare vouchers worth more than £55 a week, you’d have to pay tax on the extra.
Who can receive vouchers?
If you and your husband or partner are working and your employer(s) offers childcare vouchers, you can each claim up to £55 a week. Be aware of:
– The age limits: You can use childcare vouchers up to September 1st following your child’s 15th birthday or up to September 1st following their 16th birthday if they are disabled.
– The vouchers: Your employer will normally arrange a contract with a specialist childcare voucher provider and you’ll get electronic or paper vouchers sent directly to you.
SAVVY TIP: You may not have a choice of electronic or paper vouchers, but, if you do, it’s worth checking whether your childcare provider has a preference.
– The schemes: They can be on top of your existing pay, as part of a benefits package or via ‘salary sacrifice’. This means you take a lower salary each month and receive the amount in childcare vouchers.
SAVVY TIP: Be aware that if workplace benefits such as pension, death in service benefits (similar to life insurance but paid by your employer), sickness benefit, bonuses and/or redundancy are based on the actual salary you are paid, you may see a reduction in the amount you receive. The level of state benefits you receive could also be affected — if they are based on how much National Insurance you’ve paid. These include:
– The time limits: You don’t have to use the childcare vouchers when you’re sent them; you can save them up for school holidays etc when you may need more childcare.
SAVVY TIP: Check whether the childcare voucher provider places time limits on the vouchers. Unused childcare vouchers may be able to be refunded, but it’s down to your employer. They may choose not to allow this.
– Parents: You can only qualify for childcare vouchers if you have parental responsibility for your child or children.
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