Toni Young of CheapAccounting.co.uk explains about child care vouchers.
Do you have your own limited company?
Do you have children and pay for child care?
Then this applies to you!
What is a Childcare voucher scheme?
A company can pay each employee up to £55 per week in vouchers.
Each parent can receive these vouchers and the number of children is not taken into account.
Vouchers aren’t specific to a child and can have a long expiry date.
So if you know you’re going to have higher childcare costs in the near future you can get the maximum allowance now and use the vouchers later.
These vouchers are not taxable which means the individual pays no tax or national insurance on the benefit and the company pays no employers national insurance.
This means that a higher rate tax payer can save over £1,000 per year in tax and national insurance.
If you join a scheme after April 2011 the benefits for higher rate tax payers are going to be cut back dramatically.
Who would set a voucher scheme up?
- you are employed by your own limited company
- you have children
- you use childcare (see below for more details)
How do I set up a voucher scheme for my company?
You can use one of the many online providers.
BUT they will charge you for this service which will reduce your cost savings.
Alternatively, you can produce your own childcare vouchers.
There is no model or template for what a childcare voucher should look like – but at a minimum it would be sensible to include your company logo, contact details, and the information that it is a childcare voucher.
You then use the vouchers to ‘pay’ your childcare provider. The childcare provider will then redeem the value of the voucher directly from your company.
You must also keep records as detailed by HMRC.
What can Childcare vouchers be used to pay for?
Childcare vouchers can be used for a wide range of childcare, including nurseries, playgroups, pre-school, after-school care, play schemes, holiday clubs, nannies and au-pairs.
Childcare providers who are registered with OfSTED are eligible to accept childcare vouchers.
In addition to out-of-hours care and activities provided by schools, childcare vouchers can be used to pay for children’s residential holidays and activities, such as sport, music and drama, as long as the carer is listed on the Voluntary OfSTED Register.
Childcare vouchers can affect tax credits that you receive. If you receive tax credits it may not be beneficial to received child care vouchers.
About the Author
Toni Young is a qualified Chartered Accountant with over 15 years experience in accounting and IT.
You can send an email to Toni:
Give her a call on 0844 351 1450