Childcare vouchers are a new way for employers to help their employees with the costs of childcare.
You can get vouchers worth up to £55 a week or £243 a month (figures correct from April 2006). In exchange for these you will have to 'sacrifice' part of your salary. However, in giving up part of your taxable earnings, you receive vouchers that are exempt from tax and National Insurance Contributions (NIC). This means your vouchers are worth more than the amount of salary you sacrifice.
Your employer does not have to enter into the scheme and you may find that you are better off by claiming help with childcare through Working Tax Credit. If your employer does enter into the scheme it has to be made available to all employees within the company but you do not have to join.
Some things to consider before joining a Childcare Vouchers scheme
- Because your earnings are reduced, they may take you below the NIC Lower Earnings Limit. This could have implications for your pension - get advice.
- Taking a salary sacrifice may affect your entitlement to other welfare benefits and tax credits - get advice.
- If you are already receiving tax credits and decide to join the Childcare Voucher scheme you could end up with an overpayment - get advice.
AdviceKit strongly recommends that you find out more about Childcare Vouchers before signing up. To help you decide whether or not to join a Childcare Voucher scheme you can also have a look at our examples to see how some people can be affected.
Live in Manchester? Need more advice about Childcare Vouchers? Send us an email
Information Provider:
Manchester Advice
Date Written:
18 July 2006
This information is for guidance only and is not an authoritative statement on the law. Please read our Terms and Conditions.
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