Tax Free Childcare Vouchers – Are You IN?
If your employer offers childcare vouchers, you have until October 4th to join the scheme and could save up to £933 per year on your tax and National Insurance contributions!
Not only that, but for the separated amongst us it could mean more cash in your pocket while still meeting your child benefit obligations…
Employer childcare voucher schemes
Not all employers offer this benefit – but if yours does, you have limited time now to join the scheme and take advantage of the possible savings.
The government is closing these schemes to new joiners on October 4th 2018. It has extended the deadline once already, it may not do it again!
Even if you don’t need childcare now – it could well be worth joining and contributing to the scheme to build up a childcare fund for when you do, such as returning to work after maternity leave – as but one example.
What you can get in vouchers will depend on your earnings and when you join, the major benefit to these schemes is that you pay for your childcare before deductions are made – reducing your tax and National Insurance liability.
Why does this help? Because you were going to pay for childcare anyway, but after you’d paid tax and NI. By buying vouchers before you pay tax and NI, you have more money in your pocket at the end of the month – essentially, free money for filling out a form before spending money you were going to spend anyway!
Do check the validity period of the vouchers once issued as this may affect suitability for you – some are non refundable and / or have a time limit for use, although most are good for a long time.
If you do have access to one, an employer scheme may not necessarily be the best option. The government operates a direct scheme that could be better for you depending on how much you earn, see below for more.
If you’re going to apply, you need to jump to it. You and your employer will likely need to have everything completed prior to the next payroll date – which is before your next pay day, by a few weeks in some cases, so in reality you have a week or two to get the paperwork done. START NOW!
Government childcare voucher schemes
Your employer doesn’t offer childcare vouchers? Don’t worry!
The government also operates a direct scheme – one that may actually be more beneficial than company schemes depending on your earnings.
With the government scheme (which isn’t closing to new entries on October 4th) the government will top-up your contribution by up to 25%, so for every £8 you pay in, they’ll add another £2 on top and you can get up to £2,000 per child, per year!
That’s pretty good going.
There are different rates for each tax bracket so you will have to do your own research as to which scheme is best for you and whether you’re eligible.
More information and other childcare credits & benefits
Thankfully, this is made easy for you at the Childcare Choices website, run by the government. It also covers eligibility for Child Tax Credits, Tax Credits for Childcare and Universal Credit for Childcare.
These are all well worth looking into as even with the Tax Credits for Childcare you could claim back up to 70% of your eligible childcare costs.
What about me?
Now there may well be some of you thinking “I wish I could get help for childcare” and others thinking “I don’t need to claim benefits”.
To the first group – you probably can!
While some tax credits are based on household income, others are based on individual income, so if one parent or partner is unable to claim, the other may well be. All you have to do is visit the Childcare Choices website, answer the questions and find out.
The end result is that you have more between you to spend on what you want, not just on what you need.
To the second group – why on earth would you want to pay tax you don’t have to?
If you don’t need the extra cash, don’t give it away to the government – start another savings or investment account for the kids – or grandkids. It won’t cost you any more, but it will directly benefit you and/or your family.
Child maintenance advantages
Finally, for the separated amongst us, this could be an excellent way to increase your available cash whilst still meeting your agreed child support payments.
If any of the schemes are available to you, why not ask the other parent if they’d be willing to accept childcare vouchers in lieu of cash (especially if they currently, or soon will, make use of childcare services)?
If you can reach an agreement on this, they still receive the equivalent benefit of your contributions but you actually spend less on it. E.g. for every £10 in vouchers they receive, it only cost you £8. That’s 20% back in your pocket – which could make a big difference.
For more savings tips, check out these posts on How to save over £3,000 & find more time to spend with the kids and 5 things you can do when money is tight.
Still here? Get your mouse over to Childcare Choices and start claiming your money back!
Before you go though – please share this so as many people as possible can get involved before they close the doors in October, and don’t forget to subscribe so you get a heads-up on stuff like this in your inbox*.
The clock is ticking!
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