Your employer can provide you with childcare vouchers which can be used towards the cost of qualifying childcare. Childcare vouchers enable you to choose your own childcare provider. Your childcare provider must be registered with the relevant authorities in your part of the UK to be a provider of qualifying childcare.
The amount you can receive in childcare vouchers without having to pay tax or NICs will depend on when you joined your employer’s scheme and on the level of pay you receive from your employer.
If you joined your employer’s scheme on or before 5 April 2011 you can get up to £55 each week, or £243 each month free of tax and NICs. If you joined your employer’s scheme on or after 6 April 2011 you can still get up to £55 each week free of tax and NICs if your employment earnings are not more than the higher rate threshold. If your earnings are more than the higher or additional rate thresholds then the amount you can get free of tax and NICs is reduced.
The amount for higher rate earners is £28 each week or £124 each month and for additional rate earners the amount is £22 each week or £97 each month.
For tax purposes you are only entitled to receive up to the relevant exempt amount shown above regardless of the number of jobs or employments you may have. For NICs you can receive an exempt amount from more than one employer. If both you or your partner are provided with childcare vouchers you are each entitled to an exempt amount of childcare vouchers.
If your employer provides you with childcare vouchers above these amounts you will have to pay tax and NICs on the additional amount. You may get paper or electronic vouchers directly from your employer or your employer may ask a childcare voucher provider to provide them directly to you. Your employer will tell you which form of
voucher (paper or electronic) that they will make available to you or if you can choose.
You do not have to use childcare vouchers in the week or month they are provided. If you do not wish to use the vouchers immediately you can save them up to use later. For example, your childcare costs may be more than usual during school holidays, and you may want to use them then.
If you decide to get childcare vouchers, check that your childcare provider will accept them. If the care provider will accept them, and you have a choice of paper or electronic vouchers, ask which the carer would prefer. Your employer or your employer’s voucher provider will normally be able to answer any questions that your childcare provider has. It is possible that the childcare provider already accepts voucher payments from the voucher provider chosen by your employer.
Your childcare provider will need to make an arrangement with your employer or your employer’s voucher provider to receive payment. This is normally a simple process which your employee will tell you about.
If the voucher doesn’t cover the whole cost of the childcare, agree with your childcare provider how you will pay for the extra.
You will only receive Income Tax and NICs exempt vouchers after you have formally agreed with your employer to join a childcare voucher scheme.
When you first join a voucher scheme, it may take some time to set up. You may find that the cash element of your salary has been reduced before you receive your vouchers. If you think that you should have started to get vouchers, or you don’t get vouchers when you expect to, contact your employer or the voucher provider as soon as possible.
For more information on childcare vouchers please speak directly to your employer or visit www.direct.gov.uk