Childcare vouchers (also known as employer supported childcare) have been around for over 20 years. Their purpose is to help parents fund childcare in a tax-effective way. This is usually done via the use of a salary sacrifice scheme where the employee gives up a portion of their salary in return for a non-cash benefit that’s provided by their employer. The existing childcare vouchers scheme benefits employers and employees. Employers pay less National Insurance (NI) under salary sacrifice as gross wages are lower. Employees save too as up to £243 a month is paid directly to registered childcare providers before the deduction of income tax and NI.
Any employees who use the existing childcare vouchers scheme can continue to do so. Once the new scheme is up and running the existing one will be closed to new entrants. Whether you are an employer or employee you should see if the childcare vouchers are something that would benefit you. You will be able to swap to the new scheme later in the year if it turns out that it is better, but you won’t be able to swap back again.
Any employees who want to set up a childcare vouchers scheme before the Autumn can do so. Childcare vouchers are processed as part of payroll. Alterledger can help you set up your scheme and deal with all your payroll needs including auto enrolment. We can also help set up a policy for you to issue to employees. Where a childcare vouchers scheme is offered, it must be available to all eligible employees. Childcare vouchers can only be used to pay for regulated childcare, not for care provided by friends or relatives.
Until the planned introduction of the new childcare vouchers scheme in Autumn 2015, self-employed workers are excluded from tax breaks on childcare. The details of the new scheme are yet to be published, but the main idea of the scheme is that for every £8 one of the parents puts into the scheme, the government will give an extra £2.
Alterledger Ltd is licensed by the Chartered Institute of Management Accountants and registered with the Information Commissioners Office.
© 2021 Alterledger Ltd
Website by Haiwyre