Childcare vouchers are a flexible and tax-efficient way to cover child care costs for the employee.
Employees can agree to sacrifice up to £55 a week or up to £243 a month from their pre-tax salary for vouchers redeemable at any approved childcare provider. The employee makes tax and national insurance (NI) savings and employers can save up to 12.8% on NI. Care must taken to ensure that once the cost of the child care vouchers has been deducted from the gross salary that the employee’s reduced salary, on which tax and national insurance are paid, does not fall below the minimum wage.
Child care vouchers are often offered by employers as a standalone salary sacrifice benefit or through a flexible benefits scheme. The childcare vouchers scheme must be offered to all employees for the tax savings to apply. Full scheme conditions are available at www.hrmc.gov.uk.
The vouchers can be used in full or part payment for a wide range of child care options including a workplace nursery, external nursery, creche, nanny, au pair and child minder. But for the employee to benefit from the tax and national insurance exemption, the chosen child care provider must be registered or approved.
Childcare vouchers can only be used to pay for the care of children up to the age of 15 years (until 1 September following their 15th birthday) or the age of 16 years if they are disabled (until 1 September after their 16th birthday).†
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