Childcare vouchers are a Government initiative aimed at helping working parents with children up to the age of 15.
Each parent can receive up to £243 per month in childcare vouchers from their employer and this is free from tax and National Insurance.
Most childcare vouchers are provided through salary sacrifice, which means parents receive their vouchers instead of part of their salary.
Currently, basic rate tax payers can save up to £903 per year and top end tax payers could save up to £1487 a year.
In April the law changes and although basic rate taxpayers can still save just over £900, higher rate tax payers will only be able to save up to £610 per year and top end tax payers £590 per year.
Employers also benefit from offering childcare vouchers to employees as they do not pay National Insurance contributions on the sacrificed element of salary, this could be up to £373 per member per year.
When taking childcare vouchers, employees must be left with more than the National Minimum Wage after their salary sacrifice. If families receive tax credits, it is also important to ensure that these are not affected.
Vouchers can be used to pay for childcare in nurseries, after school clubs, holiday clubs and Ofsted registered child minders and parents can receive vouchers electronically or in paper format.
For more information about employee pay and benefits or setting up a childcare voucher scheme for your employees, contact Donna at DOHR on 01923 504100 or by email at [email protected]