Make Me Rich 6 - Love it, love it, love it Blog Discussion

From 6 April 2005, the first £50 a week of nursery care provided by an employer is exempt from tax and National Insurance. This means it's actually worth approx £74 in gross pay to a basic rate taxpayer.

Everyone concentrates on the salary sacrifice (roughly, where an employee drops (sacrifices) their salary and a commensurate amount is then paid by the employer, so the tax & NI is saved). What about all those people that are directors of their own small companies (ie, effectively one or two man bands, "self-employed" through their own limited co) and are currently forking out for childcare privately?

The scheme doesn't always have to work around surrendering money at all: an employer can now give themselves a £50 per week pay rise. So, anyone in control of the company's destiny / finances can now drop £50 a week out of their private childcare budget and put it through the company's books instead. Advantage: no NI, tax AND corporation tax relief on it as well!