Now is a time when families are finding managing their household budget a challenge as extra strains are being placed on funds due to the increasing cost of utility bills, food, fuel and childcare.
For many working parents, the heaviest burden on their finances is childcare. Childcare can be one of the largest monthly bills and as such some parents have even considered giving up work as a large proportion of their wages is spent on childcare.
When parents look at their childcare options they are often uninformed about the financial support they can get to help with childcare costs. Parents want affordable childcare without having to compromise on quality – Childcare Vouchers are the answer.
What are Childcare Vouchers?
Childcare Vouchers are available from your employer to help you save money on your childcare costs. They are then used by parents to pay their childcare provider.
How do they work?
Vouchers are deducted from your salary before you pay tax and National Insurance. Tax and National Insurance is then taken from the remaining salary which means you pay less tax, saving up to £933* per year.
Basic rate tax payers are entitled to exchange up to £243* per month from their wages in return for the same amount of vouchers. Higher rate tax payers can exchange up to £124* per month and additional rate tax payers can exchange up to £97* per month.
Childcare Vouchers are available per parent, which means that both parents can join their employers Childcare Voucher scheme, potentially doubling the savings.
Where can they be used?
Childcare Vouchers can be used to pay for any registered childcare for children up to the age of 16**. Childcare providers must be registered with Ofsted or an equivalent governing body. They can be used to pay for:
- Nurseries
- Child minders
- Play schools and pre-schools
- Nannies and au pairs
- Créches and play schemes
- Before and after school clubs
- Holiday clubs and activity camps
How can you get Childcare Vouchers?
To start
using Childcare Vouchers, you will need to join your employers Childcare
Voucher scheme. Check with your HR
department to see if your employer runs a scheme, if not you can contact BusyBees Benefits with your employer’s details and they will get in touch to set up
a scheme.
Once
registered to your employer’s scheme, you can have a deduction from your wages the
next time you get paid.
How do you pay your childcare
provider?
Busy Bees
Benefits operates a simple system which allows you to log in to your account,
select your childcare provider and make payments straight away*. Busy Bees Benefits will automatically check
that your childcare provider is registered with Ofsted or an equivalent
governing body.
Not all
Childcare Voucher providers offer this service and registering a childcare provider
can be more complex.
What happens if your childcare is
more than £243 per month?
You can
still use Childcare Vouchers. Simply pay
the outstanding amount using another payment method.
Childcare Vouchers vs Tax Credits
If you are a
parent claiming the childcare element of Working Tax Credits (Universal Credit),
you might be better off continuing to do so.
Before signing up to a Childcare Voucher scheme you can use this
Government calculator to see which is best for you: http://www.hmrc.gov.uk/calcs/ccin.htm
What will happen to Childcare
Vouchers when the new Tax-free Childcare scheme is introduced?
The
Government has proposed a new Tax-free Childcare scheme which will see 20% of a
child’s childcare costs being subsidised by the Government. The new scheme is due to be implemented in
Autumn 2015.
Childcare
Vouchers will remain in existence for a further five years after the Tax-free
Childcare scheme is in place. Those
already using Childcare Vouchers can continue to do so; however the scheme will
not be open to new entrants once the new scheme is launched.
There will
be winners and losers with the new scheme as some parents will be able to save
more using Childcare Vouchers. Those who
will be better off using Childcare Vouchers should join their employer’s scheme
now to maximise the savings available.
For more information about the new scheme visit: www.taxfreechildcarescheme.com.
*Subject to individual
circumstances.
**A child qualifies for
Childcare Vouchers up to the first September after their 15th
birthday (or the first September after their 16th birthday if they
are disabled.)