The scheme is only available through employers
The important thing to note first is that this is only available through your employers. This might be frustrating, as some employers might not be involved in the scheme. However, it doesn’t mean you shouldn’t approach your scheme to see if they are willing to sign you up. Some employers may decide to give you these vouchers as a benefit or bonus on top of your salary. However, most are likely to ask you to make a “salary sacrifice” which means you give up some of your pre-tax salary in return for the voucher.
You will likely need to make a salary sacrifice…however, it’s probably worth it
What? Give up some of your salary. Well, imagine if you need £1000 to cover childcare. You agree to give this up in return for a childcare voucher worth £1000. However, if you didn’t sacrifice this £1000 you would pay tax and national insurance and actually only receive £700 in your pay packet. So, you aren’t so much giving up a £1000 from your salary, as gaining £300 off your childcare.
The good news is that both parents can take advantage of childcare vouchers. So, a basic-rate tax payer can pay for £243 of childcare each month out of their salary. Two parents therefore can pay for £486 of vouchers per month. This is up to £110 per week towards your child’s care while you are at work.
If you are a higher-rate taxpayer the amount falls to £28 per week per person. The top-rate taxpayer can claim for £25 per week per parent.
What if you have more than one child?
Unfortunately for those of you with lots of children, the amount is not impacted by how many need this childcare. The limit is the same whether you have one child or seven. Once the voucher runs out, you will be expected to top this up yourself with the childcare provider directly.
You can collect vouchers and spend them later
The great news, which you might not know, is that vouchers last a long time. Therefore, you do not have to use them each week. If you only need childcare in the holidays, for instance, you can collect your vouchers and use them all at this time. It is important to do your maths carefully. Vouchers cannot be refunded or redeemed on anything other than childcare. So, if you end up with more than you need there is no getting your money back.
The vouchers are available for use from your child’s birth until the September after the child’s 15th birthday. The voucher can only be used with registered childcare providers – it is usually easy to work out which these are because they will likely have an OfSted rating.
Here is some great news that a lot of people miss. Your vouchers can also be used for tuition for your child. The technical reason for this? Well, whilst the tutor is working with your child they are offering care. So, even if your burly 14 year old lad is in the company of an English tutor, this can still be paid for using the vouchers collected from your employers. The tutor would also need to be registered but it is always worth asking!
Remember the only way to get these vouchers is through your employer. If they do not provide vouchers it is worth asking if they could, as it won’t cost them anything and it will be a huge bonus to you. Employers can actually hire firms to do the voucher admin for them and they should still benefit themselves from the NI gains from running the scheme – so there is something in it for them too!