Childcare Vouchers

Childcare vouchers are a benefit scheme offered by employers, allowing you to allocate a portion of your salary towards childcare costs. These are then accepted by registered or approved childcare, helping to offset childcare costs. No tax or National Insurance (NI) is charged on the portion of your salary allocated as childcare vouchers.

The amount you can save depends on the level of tax and NI you pay, but could amount to as much as £915 - £1,195 per year. You can maximise your savings if your partner also opts for childcare vouchers, as you are both allowed to claim regardless of how many children you have. You could potentially save £1,830-£2,390 between the both of you.

The amount of vouchers you can receive is capped at £55 per week (£243 per calendar month). Your net pay after vouchers should also remain above £420.33 per month (£97 per week). This is to ensure you always pay the minimum amount of National Insurance on which a number of state benefits, including Statutory Sick Pay, are dependent.

Your employment contract may need to change to formally acknowledge exchanging part of your taxable salary for childcare vouchers. This is usually called a ‘salary sacrifice’ agreement. Note that if you leave the scheme before your renewal date (usually 12 months), you may have to pay back tax and NI on any childcare vouchers.


Who is eligible?

Childcare vouchers can be used for childcare up to the age of 16. You must be either the parent or step-parent of the child, or have legal guardian responsibility, in order to qualify. Childcare vouchers are available for both male and female employees and must be used for registered or approved childcare.

Unfortunately, if you are self-employed you will be unable to claim childcare vouchers, as they are part of an ‘employer supporter scheme’. However you may be able to get help with childcare costs through Tax Credits - contact the Tax Credits helpline on 0845 3003900.


How can I use the vouchers?

You can use the vouchers for a wide range of registered or approved childcare, including:

Home based care: Childminders, nannies and au pairs
Pre-school care: Nursery schools, play schools and crèches
Care for older children: Extracurricular clubs (breakfast clubs/afterschool clubs) and holiday clubs

It is possible to use the vouchers for more than one childcare provider, for instance a nursery and a nanny. You may also decide when you want to use them; for example, you can save them to use on more expensive childcare months (e.g. school holidays). Although some vouchers have a 12-month expiry date, it is advisable to check this with your employer.

Note that in order to qualify for childcare vouchers, your childcare provider must be approved or registered. This means your provider can’t simply be a relative, unless they are a registered childminder. Check if your childcare is registered or approved:

England– Ofsted Childcare Register
Northern Ireland – Local Health and Social Services Trusts
Scotland – The Care Commission
Wales – Childcare Approval Scheme
Wales – The Care and Social Services Inspectorate

Your employer may have a scheme set up already with one of the voucher provider companies, who can advise further on how to pay for your childcare.


How can I get them?

Speak to your employer; they may already have a scheme in place. If they don’t, talk to them about setting up a scheme, as it saves them money as well by not having to pay National Insurance. There are numerous voucher companies that can help set up the scheme administration:

Busy Bees
Accor Services
KidsUnlimited Vouchers
KiddiVouchers
Employers for Childcare
Sodexo


Will my claim for Working Tax Credit be affected?

There may be an effect on childcare tax credit, as you will be reducing the costs your Working Tax Credit calculation is based on. It is advisable to contact the Working Tax Credit helpline on 0845 300 3900 before applying for childcare vouchers, as they can help you decide which option or combination will give you the most saving.

As a general guide however, your family will be better off accepting childcare vouchers in return for a salary sacrifice if you can answer 'yes' to one of the following:

• Your eligible childcare costs are more than £175 per week if you have one child, or £300 per week if you have two or more children. In this case you will always be better off accepting childcare vouchers to cover your childcare costs above these limits.
• You are receiving tax credits at the family element (£545 per year, or £1090 per year if you have a baby under the age of 1) or less and you are claiming for your childcare costs.

Your family will generally be worse off (or no better off) accepting childcare vouchers in return for a salary sacrifice if you can answer 'yes' to both of the following:

• You are receiving tax credits of more than £545 per year (or £1090 per year if you have a baby under the age of 1) and you are claiming for your childcare costs.
• Your eligible childcare costs are no more than £175 per week if you have one child, or £300 per week if you have two or more children.

Further information is also available at HM Revenue & Customs.


Will they affect any future maternity pay or my pension?

You should speak to your employer, as it will depend on your situation.

Other related articles from MyEggNest:

A Quick Overview of Childcare Vouchers

Childcare Support Whilst Learning 

Top Tips for Choosing Childcare

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