- Cheshire Childcare Vouchers the smart way to save tax and national insurance -spacer
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Cheshire Childcare Vouchers Childcare Vouchers for Parents Childcare Vouchers for Employers Childcare Vouchers for Carers
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frequently asked questions
head buzzing with questions? read on….
Cheshire childcare vouchers
  
frequently asked questions

offering childcare vouchers as part of your employee benefits package is an excellent way of attracting new staff as well as retaining and motivating existing employees. It can mean some changes to the way you pay your employees and so we have put together a series of typical questions which often arise when considering the adoption of childcare vouchers.

What is the maximum amount employees can claim in childcare vouchers each week? Employees can claim up to £55 per week (£243 month) in childcare vouchers—tax and NI free. You also benefit by not paying Ers NIC. Any additional vouchers provided above this amount will be liable for the payment of Class 1 NICs.
What qualifies as registered and approved childcare?

To claim vouchers employees must have children under 16, or under 17 if disabled, in registered or approved childcare which includes:

Childminders, nurseries and play schemes

Out-of-hours school clubs

Nannies and au-pairs

What if an employee only uses childcare in the school holidays? They simply need to calculate their annual spend on childcare and divide by 12. This will be the amount they need to claim in vouchers each month.
Can employees use vouchers for more than one provider? Yes, but remember to ask them how they would like to split their entitlement.
Can both parents claim vouchers for the same child? Yes, as long as they are both employed and paying tax and national insurance
Will an employee’s claim for childcare vouchers have any impact on Child Tax Credit and Working Tax Credit?

The Inland Revenue states families will generally be better off accepting childcare vouchers in return for a salary sacrifice if they can answer “yes” to one or more of the following:

their eligible childcare costs are more than £175 per week if they have one child or £300 per week if they have two or more children.

they are receiving tax credits at the family element (£545 per year, or £1090 per year if they have a baby aged under one) or less and are claiming for childcare costs.

they pay tax on earnings at the higher rate of 40%.

Families will generally be worse off or, at best, no better off accepting childcare vouchers in return for a salary sacrifice if they can answer “yes” to all of the following:

they are receiving tax credits of more than £545 per year (or £1090 per year if they have a baby aged under one) and are  claiming for childcare costs.

they do not pay tax on earnings at the higher rate of 40%.

their eligible childcare costs are no more than £175 per week if they have one child or £300 per week if they have two or more children.

More detailed information can be found on our resources page.
Must vouchers be used in the same month as they are received? No, they are valid for up to 12 months.
When do employees receive their vouchers? Vouchers should be distributed at the same time they receive their weekly or monthly salary.
Will employees have to take a salary sacrifice to benefit from childcare vouchers? 

It depends how you introduce the scheme, if you are not offering the vouchers in addition to their existing salary, then you will have to put a salary sacrifice in place.

This happens when an employee gives up the right to receive part of the cash pay due under their contract of employment. It usually takes place when that amount of cash is replaced with a benefit in kind—in this case childcare vouchers. See our resources page for more information.

How do vouchers impact on the minimum wage? You must ensure that the portion of salary remaining after childcare vouchers have been claimed is above the minimum wage. This can be calculated by dividing the salary by hours worked.
How will a salary sacrifice affect company contributions to an employee pension? It may reduce the amount of an employer’s contribution to an employee’s pension, however this will be outweighed by savings the employee makes through non payment of tax and national insurance of the value of the voucher.
From the table, why would savings for someone earning  £35,000 be less than say someone on £30,000? Employees earning over £33,540 pay NI at 1%. So, at £35,000 they pay 1% NI and tax at 22% compared to 11% NI and 22% tax at £30,000—therefore NI savings at £30,000 are greater.
Can a person benefit from childcare vouchers to contribute towards childcare for a child who is not their own (e.g. if they are a grandparent of the child)? Yes, child carevouchers are available to parents and those living with the child who have legal parental responsibility for that child.
Can an employee return unused childcare vouchers to the employer? If so, are they put through the payroll as income to collect Tax & NICs? On the whole vouchers cannot be returned. However HMRC accept that unforeseen circumstances can arise which mean that a voucher cannot be used for the purpose for which it was intended - for example, death of the child, redundancy of one parent etc. In this case vouchers returned for cash would be liable for tax and Class 1 NICs in the normal way.
What information will I need to provide to the Inland Revenue? You will need to provide full details of the voucher plan including employees and childcare providers involved and new employee contractual arrangements - we will provide the necessary documentation.  Essentially the Inland Revenue must be satisfied that the employee’s cash pay has been reduced and an approved benefit has been implemented - ie that you are not using the voucher plan to meet any other of the employee’s own financial commitments.
How much will it cost? You will pay a maximum of 8% of the voucher value per participating employee. This cost is more than outweighed by the savings in Ers NIC you will make. However, the real benefit in implementing the scheme is the amount you allow your employees to save in tax and NI —between £642 and £1,196 a year.





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