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Childcare Vouchers

Childcare Vouchers

Using Government childcare vouchers to pay for childcare can save parent thousands of pounds a year. The scheme is operated by employers and allows childcare to be paid for from pre-tax salary. 

Basic rate taxpayers can buy up to £55/week voucher, generating a maximum annual tax/National Insurance saving of £930. This is per parent, and is not affected by the number of children you have.  For higher rate taxpayers the annual saving is £630 and for Top rate tax payers, the figure is £590. 

The current scheme “Childcare Vouchers” is closing to new applicants from April 2018 and a new scheme Tax Free Childcare is being introduced. 

The new scheme, launched in April 2017 gives eligible families an extra 20% towards childcare costs. In total families can use the scheme to pay for up to £10,000 per child each year, so eligible families could receive up to £2000 per child towards childcare costs.

A simple comparison of the two schemes was conducted by moneysavingexpert.com and they conclude that there will be winners and losers depending on your own circumstances.

https://www.moneysavingexpert.com/family/childcare-vouchers

 In general terms: 

Tax-Free Childcare is best suited to:

  • Self-employed people or couples who earn less than £100,000 each
  • Parents with more than one child and high childcare costs

Childcare Vouchers are best suited to:

  • Couples where one parent doesn't work
  • Basic-rate taxpayer parents with total childcare costs of £9,336 or less
  • Higher-rate taxpayer parents with total childcare costs of £6,252 or less
  • Higher earners, earning £100,000+ (or in a couple where one earns £100,000+) as they are eligible for Childcare Vouchers but cannot participate in the Tax-Free Childcare scheme.

If you would like to speak to us about your own circumstances, please do get in touch.