Childcare vouchers work through a salary sacrifice arrangement. Employees swap part of their pay for a childcare voucher to spend with their chosen childcare provider out of their pre-tax salary.
Employees can purchase up to £2,916 worth of childcare vouchers this way and set up regular payments so it happens automatically every month. This means they lose less of their wages to tax and National Insurance and can save up to 32% on their annual childcare costs (for a basic-rate taxpayer).
And the good news doesn’t stop there! For businesses who have already joined the scheme, they will see National Insurance savings of up to 13.8% thanks to reduced taxable salaries.
Whilst the scheme has proven immensely popular, it is now closed to new applicants.
The UK Government has introduced a new tax-free childcare scheme in October 2018 which replaces childcare vouchers. Instead, the new scheme means families with children can get 20% of their childcare fees paid for by the Government.
To learn more about the Government’s Tax-Free Childcare, visit their dedicated web page here.
Customers who joined before the October 2018 deadline can still offer childcare vouchers to their employees and this is a service we’re proud to continue to provide to our clients.
If we are currently providing childcare vouchers to you or your employees and you have a question about the scheme, please contact our customer care team at firstname.lastname@example.org