Childcare Vouchers vs Tax Credits

montymuscles

Hello! I’ve been trying to work out if I would benefit from receiving Child Care Vouchers, Sacrificing part of my (and / or my wife’s) income. I understand that this will affect my Tax Credit allowance and am not sure which option will be better financially. When I speak to anyone at the tax credit office I get spoken to in riddles!
I’m aware that the answer will probably differ from person to person – but does anyone know an easy way to work out what I should do?
Cheers – montymuscles

cw18

If you get the childcare element of WTC then you will have to be careful. If you only get CTC, then I don't think it's as big a problem.

montymuscles

Cheers - yeah - We get WTC of which a chunk is for childcare...

LizzieS_2

Firstly you need to see if both employers operate a childcare voucher scheme.

Secondly you need to look when you can join (not always immediate depending upon size of employer).

Thirdly you need to compare whether childcare within tax credits is less/greater than childcare vouchers.

cw18

If I understand the system with at least some degree of comprehension, that's where you'll have issues.

If your childcare is £200/week, then if you take Childcare Vouchers they'll cost you £160.

If you get full 80% from WTC then they pay £160 and you pay £40 (plus the £40 tax on the £200, hence your contribution is £80 compared to the £160 if you take Vouchers).

What you CAN'T do is get both for the same element of Childcare.


But if you're childcare is more than the maximum WTC pays towards you can mix. So if you have more than 1 child in child-care, then the most they pay towards is £300 (so the most from them is £240, and you pay the extra £60). If your actual childcare bill is £400, then there's nothing stopping you taking £100 in Childcare Vouchers (so they cost you £80) and declaring £300 to WTC.



I'm sure someone will be along to confirm if my understanding/ramblings are correct or not though.

montymuscles

It's all SO confusing!!! Thank you for trying to explain it but my brain starts to fizz!!!

Basically - as far as I'm aware - The maximum you can receive in vouchers is £243 per person (tax &NI free). If both me and my wife did this - £486 would be paid to our childcarer per month and we'd pay her the balance. (our monthly payments to her are more than this - about £900 for both my daughters (our youngest all day & our eldest for 2 hours a day after school)).

This would obviously mean that our income would reduce by this amount also, and I believe that our WTC would reduce as we would have a lesser figure to declare as childcare allowance.

My wife is already set up with the voucher scheme and my employer says he can look into it - but I'm very confused as to whether to we are going to benefit of not...

[Deleted User]

http://ccincalculator.hmrc.gov.uk/

Use this link to check if you would be better off using vouchers or claimng help from TCO.

Remember that the amount you pay towards the vouchers is disregarded as income for tax credit purposes.

montymuscles

Thats superb - thank you very much!