Home >Economy & Finance >Child Care Vouchers

Child Care Vouchers

Date post:22-Jan-2018
Category:
View:211 times
Download:0 times
Share this document with a friend
Transcript:
  1. 1. UnderstandingChild Care Voucherswith Green & Peter
  2. 2. What are Child Care Vouchers?Child care vouchers are vouches from your employer that cansave many parents with children aged up to 15 over 1,000 ayear on childcare.With child care vouchers you pay for child care out of yourPRE-TAX and National Insurance income.
  3. 3. How Does it Work?Some employers may simply give you the vouchers on topof your normal salary, but most will ask you to do a 'salarysacrifice', which, if you're on basic-rate tax, workssomething like thisYou give up 1,000 of salary... ...but after tax & NI that'sonly worth around 700 in your pocket. In return, you get1,000 of vouchers... ...so you're 300 better off.
  4. 4. How Many Vouchers Can You Buy?Basic-rate taxpayers can pay for up to 243 of child care with vouchers eachmonth. This is PER PARENT, so two working parents could get 486 ofvouchers each month.The limits from April 2014 are:Basic (20%) taxpayer: 55/week voucher, max annual tax saving 930.Higher (40%) taxpayer: 28/week voucher, max annual tax saving 630.Top rate (45%) taxpayer: 25/week voucher, max annual tax saving 590.The number of children you have doesn't affect the limits.Vouchers last a long time but are non-refundable. You can save vouchers fora period when you know your child care cost will be higher, for example,summer holidays but be careful not to collect more than you can use.
  5. 5. What Counts as Child Care?The vouchers cover child care up to 1 September after your child's 15thbirthday (their 16th birthday if they are disabled).The provider must be regulated. Vouchers can be used by any registeredand regulated nursery, playgroup, nanny, child-minder or au pair.You can also use child care vouchers for tuition for your child - as thetutor is providing 'child care' at the same time as the tuition.A relative looking after a child in the child's own home won't be eligible toreceive the vouchers. Yet vouchers can be claimed for carers that areregistered child-minders looking after a child in their own home.
  6. 6. Further Help With Child Care CostsThere are other schemes in place to help with child carecosts, including tax credits, holiday provision, and at least15 hours' free child care each week (to be spread over atleast three days) for all three and four-year-olds beforethey reach school starting age (term-time only).
  7. 7. Where to Get Vouchers From?Any parent, or those with parental responsibility for a child living with them, iseligible for the vouchers. Yet sadly, to get them, your employer must run a scheme.Ask your employer if it runs a childcare voucher scheme.Check with your HR department.If you're a sole trader, you're not eligible as you're not classed as an employer.What if your employer doesn't offer a scheme?Providing childcare vouchers shouldn't cost your employer any money as theydon't pay National Insurance on the vouchers, it actually reduces their costssignificantly! So try to persuade them.
  8. 8. How can an employer begin a scheme?Firms can either operate the scheme themselves or use one of the many vouchercompanies to do all the admin for them. The fee for this should be less than the firmgains in national insurance, so they'll still profit.These providers include: Kiddivouchers (which donates at least 5% of all profits tovarious charities) and Employers For Childcare (a not-for-profit organisation).Many of these companies will also contact your employer if you ask them to.Can my childless friend get vouchers for me through his work scheme?You can only get childcare vouchers if you are the childs parent or guardian. You'llsign a declaration stating you understand this when you apply for the childcarevouchers scheme.So you're not allowed to get your childless friend to enter his employer's schemeand buy the vouchers off him. It breaches the voucher scheme's terms andconditions, and HMRC regards it as potential tax evasion.
  9. 9. Child Care Tax Credit: How do Vouchers Affect it?While many people can save by using vouchers, they do come with two warnings They may reduce your pay They can affect other benefitsIf you need to sacrifice some of your salary to get vouchers, this can have an impacton other elements of your finances that depend on how much you earn - such aspension contributions, maternity pay and more.This is only likely to be a minor issue for most and easily overcome by the gain fromvouchers, but it's worth being aware of.
  10. 10. The Impact on Childcare Tax CreditsTax Credits are a type of benefit and in many cases it can be a very significantamount. The average pay-out is about 60 a week - over 3,000 a year.For many people with children, getting childcare vouchers reduces youreligibility for tax credits, potentially leaving you out of pocket because theamount of tax credit you get depends on how much you pay IN CASH (ie, notvouchers) for childcare. Heres a simplified example...The Joneses are entitled to 70% of their childcare costs in tax credits. Pay 100in cash a week - they get 70 of tax credits. Pay 50 in cash and 50 invouchers (which they had to buy) and theyre only entitled to 70% of 50 paidin cash, which is 35 of tax credits.This means using childcare vouchers can reduce your tax credits, which meanssome people are better off not getting vouchers at all.
  11. 11. Should you go for childcare vouchers or not?If you're eligible for tax credits for then you're likely to be better off sticking withONLY tax credits and not getting vouchers.There are a few circumstances in which you could still gain getting vouchers. Forexample, if your childcare costs are above 175 a week for one child or 300 fortwo or more children.If you can't claim tax credits, then you'll ALWAYS be better off using vouchers topay for childcare.Use the special childcare voucher calculator on the HMRC site which willcalculate if you're better or worse off taking the vouchers.
  12. 12. How will childcare vouchers change in 2015?A new scheme, Tax-Free Childcare, will replace the existing voucher scheme inautumn 2015. If you're already on the current scheme, you can stay on it until yourchild reaches 15 (providing you don't move jobs). But, unlike childcare vouchers, itwill be open to all qualifying parents, not just people whose employer offers thescheme.Tax-Free Childcare will be open to single parents and couples who work 8+ hours aweek (including self-employed) and who pay for Ofsted-registered childcare for achild under the age of 12 (or 16 if the child is disabled).Under Tax-Free Childcare, eligible families will get 20% of their yearly childcarecosts paid for by the Government. This could mean up to 2,000 per child (thescheme assumes a maximum of 10,000/year childcare costs per child).
  13. 13. Useful Numbers & WebsitesSearch for your nearest Family Information Service on the Daycare Trust website, which should be able to tellyou about what's available in your area - daycaretrust.org.ukThe HMRC website has a useful leaflet on Child Care Vouchers - www.hmrc.gov.uk/leaflets/ir115.pdfPlus you can check on these official websites:In England.Go to the Ofsted website - www.ofsted.gov.ukor call 0300 123 1231In Wales.Check the Care and Social Services Inspectorate website - cssiw.org.ukIn Scotland.Go to the Care Inspectorate website - www.scswis.comor call 0845 600 9527In Northern Ireland.Check the Department of Health, Social Services and Public Safety website - www.nidirect.gov.ukor call 028 9052 0500
  14. 14. We hope this information has helped you furtherunderstand Child Care Vouchers.For all accounting needs please feel free to contact usGreen & PeterCall: 020 8446 8100Email: [email protected]: Green & PeterThe Limes1339 High RoadWhetstoneN20 9HRAll information has been taken from Money Saving Expert www.moneysavingexpert.com/family/childcare-vouchers