Childcare Costs discussion

susancs

sandi241 wrote: »

Hi all! this is my very first technical post of any shape or form (so apologies for wherever this ends up)?! But I have a question. My partner & I both earn around £16,000 each and pay £730pm childcare for our son who is full time in a nursery. I am enrolled in the childcare voucher scheme but my partners firm is not included in this. I thought with the new 20% tax-free childcare scheme we would actually save 20% of £730pm (a saving of £146 each month)? But when doing the calculation it states we are better off staying on the voucher scheme (saving of £42pm) I don't understand? Please enlighten me.....?? Was the promise of 20% too much to hope for I really am confused.
Sandra

You are correct as you work out £730 for 12 months which is £8760 and then mulitply by 0.2 to get an anuual saving of £1752 (which divided by 12 works out £146 per month). Have a look at his site as it explains it:
http://vouchers.employersforchildcare.org/media/march-2014-tax-free-childcare-vs-childcare-vouchers-2.pdf

goonerjon

Hi
I am a working parent who will be in the 40% tax bracket and can get childcare vouchers through my work. My wife also works but cannot get childcare vouchers through work and would be on 20% tax. We've recently had our first child and my wife will soon be going back to work, so we will be looking to put my son into childcare in the near future. What I'm unsure of is whether I would be better off getting childcare vouchers through my work or taking the new government tax free scheme. Childcare costs would be approx £5k per year for 1 child. I think the new government scheme will be best but am not 100% sure.
Also, can I get childcare vouchers and my wife apply for the new government scheme or is that not allowed?
Thanks
Goonerjon

rpc

Are you old rules or new for vouchers?

Under the new scheme, you save 20% so £1k. For a 20% taxpayers vouchers save very slightly less. For a 40% taxpayer under the new rules you would save less again. So in any of those situations, you would probably go to the new scheme.

For a 40% taxpayer under the pre-2011 rules, you will save more by staying on vouchers as you get 42% relief.

Jacko_amz

Can someone please explain this 'new scheme' to me, me and OH are planning on starting a family, we both work full time and i intend on returning to work after 9 months. I find all this child care info very hard to get my head around! salary combined we earn 45k so we won't be entitled to any tax credits etc. Thank you for your help amy x

goonerjon

rpc wrote: »

Are you old rules or new for vouchers?

Under the new scheme, you save 20% so £1k. For a 20% taxpayers vouchers save very slightly less. For a 40% taxpayer under the new rules you would save less again. So in any of those situations, you would probably go to the new scheme.

For a 40% taxpayer under the pre-2011 rules, you will save more by staying on vouchers as you get 42% relief.

Thanks
I'd be on the newer vouchers as I have not taken them before as my son is only 6 months old. Your reply is slightly confusing tho - 'for 40% taxpayer under the new rules you'd save less again' - I assume your referring to the post 2011 vouchers here? But anyway, you think that the new govt scheme would be better for us as only 1 parent can claim childcare vouchers who pays 40% tax. New scheme allows me to get a contribution of £1k. How can I work out what I'd save on vouchers? Would it be £136 per month *12 * the tax relief for 40% + NI savings? Probably about £700??? So would be better on the new govt scheme - is that right???

susancs

goonerjon wrote: »

Thanks
I'd be on the newer vouchers as I have not taken them before as my son is only 6 months old. Your reply is slightly confusing tho - 'for 40% taxpayer under the new rules you'd save less again' - I assume your referring to the post 2011 vouchers here? But anyway, you think that the new govt scheme would be better for us as only 1 parent can claim childcare vouchers who pays 40% tax. New scheme allows me to get a contribution of £1k. How can I work out what I'd save on vouchers? Would it be £136 per month *12 * the tax relief for 40% + NI savings? Probably about £700??? So would be better on the new govt scheme - is that right???

Have a look on the link below as it explains it well.
http://vouchers.employersforchildcare.org/media/march-2014-tax-free-childcare-vs-childcare-vouchers-2.pdf

If you decided to take up the childcare voucher scheme before Autumn 2015, your annual childcare savings would be £624.96 as a 40% tax payer (max you can sacrifice is £124 per month of which 40% is £52.08 per month x 12 is £624.96), with your OH not having childcare vouchers. Under the Tax free childcare scheme you would save 20% of your childcare costs, so if paying £5000 pa childcare you would save £1000 pa (20% of £5000).

susancs

Jacko_amz wrote: »

Can someone please explain this 'new scheme' to me, me and OH are planning on starting a family, we both work full time and i intend on returning to work after 9 months. I find all this child care info very hard to get my head around! salary combined we earn 45k so we won't be entitled to any tax credits etc. Thank you for your help amy x

The new tax free childcare system, coming in Autum 2015, is based on childcare costs and not salary and if you pay tax you will be able to get 20% of your childcare costs, up to a maximum of £2000 saving per year, per child. So if it was £10,000 pa for childcare costs you would save £2000pa (if paying more in childcare costs you would still save £2000 and if less you would get 20% of the actual childcare costs) . After Autumn 2015 you will not be able to join the childcare voucher scheme so that does not apply to you.

RQMS

my wife is self employed and has been offered child care vouchers through Sodexo but they said there is a management fee of £17.50 a month. I read somewhere on MSE there should be no cost to an employer using the scheme so I'm confused why she should be charged, does anyone know of a provider who does not charge or has lower fee for self employed? Thanks

susancs

RQMS wrote: »

my wife is self employed and has been offered child care vouchers through Sodexo but they said there is a management fee of £17.50 a month. I read somewhere on MSE there should be no cost to an employer using the scheme so I'm confused why she should be charged, does anyone know of a provider who does not charge or has lower fee for self employed? Thanks

There are no costs to the employee, but employers have to pay a company to administer the scheme. Because employers make a saving on the National Insurance contribution they pay for the employee, it does not usually cost them in reality. Different childcare voucher providers charge different % rates on vouchers purchased, so it would be worth ringing diifferent providers to see who offers the best rates.

rpc

RQMS wrote: »

my wife is self employed and has been offered child care vouchers through Sodexo but they said there is a management fee of £17.50 a month.

If you are self-employed then you can't benefit from childcare vouchers. They are a means to provide employer-supported childcare and your wife doesn't have an employer.

A sole director/employee company could put vouchers in place (and could shop around for the most suitable deal). They probably wouldn't get the same pricing as a large employer and given there are other methods of providing employer provided childcare then it might not be the most cost/tax efficient.

Different providers have different charging structures. My wife set them up for her employer and they charged 6% for a mid-sized employer. The employer gets 13% NI relief, so it still saves the employer something.