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What do I need to know about Childcare?

If you fall within the ‘basic rate’ tax bracket you may be able to supply each employee with up to £243 per month in childcare vouchers, providing the employee meets certain conditions (listed below). For ‘higher rate’ tax earners you may be able to supply £124 per month. ‘Additional rate’ tax earners may be able to supply £110 per month.

There are two ways in which you can allocate payment: by direct agreement with a childcare provider, or through a voucher scheme. If you decide to go through a direct channel, you will need a letter between you and the provider confirming the amount you intend on paying. 

A child is eligible up to his or her 15th birthday (16th if disabled). In order to qualify for childcare you or your employer must meet the subsequent conditions:

  • Must have the child/stepchild living with you
  • Be the one providing the maintenance costs for the child
  • Use a registered carer. You cannot use a relative as a carer unless they run a childcare business and are looking after other children also

Whats new? 

The tax free childcare account will be available from early 2017 for parents of the youngest children.  All parents will be eligible to apply by the end of 2017.

Key features:

  • Available to the self-employed and employees whose employer does not provide employer-supported childcare.
  • Managed via parents' on-line account.
  • Government top-up of 20p for every 80p paid to a maximum of £2,000 per child per year for an £8,000 contribution by parents.  The maximum top-up for disabled children is £4,000.
  • Grandparents, other family members or employers can pay into the account.
  • Both parents must be working the equivalent of 16 hours per week at the National Living Wage.
  • Neither parent must earn more than £100,000 per year.
  • Covers children up to the age of 12, and for children with disabilities up to the age of 17.
  • Parents can withdraw money if they want to, but the government will also withdraw its corresponding contribution.
  • Current employer-supported childcare arrangements (vouchers and contracted childcare) continue so long as employer is willing to continue them and employee stays with the same employer.
  • Employer-provided nurseries are unaffected by the new scheme.
  • Parents will re-confirm their online every three months.

If you are looking for a childcare provider, although we don't provide advice on who to choose we partner with All Save UK, there website here found here: http://www.allsaveuk.com/salary-sacrifice/childcaresave/

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