Some employers offer their employees childcare vouchers to help with childcare costs through a special government scheme. The vouchers are usually offered in return for a reduction in part of your salary (sometimes called salary sacrifice) and are given back in the form of paper or electronic vouchers.
The scheme was due to be closed to new applicants from April 2018 but this has now been extended until October 2018. Once the scheme closes it will be replaced by the government's new Tax-Free Childcare scheme. However, if you are using childcare vouchers you can choose to continue to use these instead of joining the new scheme.
To be eligible to claim vouchers:
- you must live with and have parental responsibility for the child who will use the childcare.
- you must have an 'eligible' child. A child qualifies up to 1 September following their 15th birthday, or if the child is disabled, up to 1 September following their 16th birthday.
- the childcare you use must be Ofsted registered.
- your employer must be offering a childcare voucher scheme.
- you cannot be self-employed.
How much can I save?
The vouchers are exempt from tax and national insurance up to the limits shown below regardless of the number of children you have.
- Basic rate tax payers £55 per week or £243 per month.
- Higher rate tax payers £28 per week or £124 per month (£55 per week or £243 per month if you joined a scheme on or before 5 April 2011).
- Additional rate tax payers £25 per week or £110 per month (£55 per week or £243 per month if you joined a scheme on or before 5 April 2011).
Receiving childcare vouchers from your employer can affect your entitlement to Working Tax Credit. By reducing your salary you may be entitled to a higher element of the Working Tax Credit but this could reduce your entitlement to the childcare element of the credit.
To find out whether you'd be better off receiving the vouchers or claiming for help with childcare costs through tax credits, you can use the Childcare vouchers: better off calculator on the gov.uk website.
If your employer doesn't offer childcare vouchers but the results show that you'd be better off with them, speak to your employer to see if they would consider offering them.
Would I be better off using Tax-Free Childcare instead of childcare vouchers?
This would depend on factors such as how much you earn, what your childcare costs are and the age of your children. However, if you use the childcare calculator on the gov.uk website it can give you an estimate of each scheme to help you make a comparison between them.
How to use childcare vouchers
You can use the vouchers to pay for Ofsted registered childcare such as childminders, day nurseries, pre schools, breakfast clubs, after school clubs, out of school activity clubs and holiday playschemes. You will need to check with them that they are happy to accept childcare vouchers and if the voucher doesn't cover the full cost of the childcare agree how you will pay the extra cost.
If they are willing to accept vouchers they will need to register with your childcare voucher provider to enable them to receive payment. This is normally a simple process and can usually be done through the voucher provider's website or by phone. Your employer or voucher provider should be able to answer any questions your childcarer may have.
Childcare vouchers can be used to pay for childcare with more than one childcare provider and childcarers can also register with more than one voucher provider.
You can find further information about using childcare vouchers on the gov.uk's Help paying for childcare web page.
Claiming vouchers during maternity leave
You can join a voucher scheme anytime whilst on maternity leave and save the vouchers towards future childcare costs you do not have to wait until you return to work.
If you receive childcare vouchers as a salary sacrifice, your employer cannot deduct the amount of the vouchers from your Statutory Maternity Pay (SMP) they must pay SMP in full for 39 week.
If you are entitled to extra (contractual) maternity pay, your employer can continue to apply the agreed salary sacrifice during maternity leave - check your contract or salary sacrifice agreement.
However, companies are no longer legally obliged to provide childcare vouchers if you have no salary to sacrifice. This follows a March 2016 Employment Appeal Tribunal decision that it is not discriminatory for an employer to have a rule in its scheme that an employee's membership is suspended during maternity leave.