How Do Childcare Vouchers Work?

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How Do Childcare Vouchers Work?
Childcare vouchers are a great way for working parents to save but not enough parents are making the most of them. So how do childcare vouchers work?

You’d be forgiven for thinking that childcare vouchers and ‘salary sacrifice’ seem confusing but it is actually a very simple process. Childcare vouchers are incredibly versatile and if you’re a working parent and pay for childcare then the scheme could save you hundreds of pounds each year.

How do Childcare Vouchers work?

Childcare vouchers are used by hundreds of thousands of working parents every day. If your employer operates a voucher scheme, then your family could be saving as much as £1,866, depending on your circumstances. With childcare costs continuing to soar, and increasing pressure on family budgets, that’s a savings not to be sniffed at. The scheme works by allowing working parents to ‘sacrifice’ part of their salary up front, to pay for childcare costs. This sacrificed money, which can be up to £243 per month, is not subject to tax or National Insurance (NI). It becomes a voucher which can be given to a registered childcare provider.

Who are Childcare Vouchers for?

1. Childcare vouchers are not just for babies and toddlers.
child painting in nursery

Childcare vouchers can actually be used for children right up to age 15, or up to the age of 16 for children who are registered disabled.”

2. Childcare vouchers are not just for nursery care.
Childcare vouchers are actually incredibly flexible and can be used for a broad range of childcare needs. They can be used for towards the cost of nursery care, but also many other types of registered childcare, including nannies, au pairs, breakfast and after school clubs, holiday clubs, play schemes – even music lessons.

3. Childcare vouchers are available to higher rate tax payers.
The childcare voucher scheme is open to all working parents, no matter what tax band they fall in. However the amount of salary that can be sacrificed each month is different. Basic Rate taxpayers can get up to £243 per month, Higher Rate taxpayers up to £124 and for Additional Rate it’s up to £110.

4. You can use childcare vouchers for more than one child.

You can use your childcare vouchers for more than one child, as long as you are the parent, legal guardian or have parental responsibility. However, no matter how many children you have the maximum value of vouchers you can claim is capped by the Government in relation to your tax band.”

5. Childcare vouchers can be saved up.
There are times of the year when you may not need to use your childcare vouchers, such as during the summer holidays. The good news you can still order the same amount, as you don’t have to use them straight away. You can build up your vouchers for a time when you need more childcare cover.

Information provided by by Julian Foster, MD of Computershare Voucher Services
October 2013

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