childcare vouchers vs tax credits

missis_amber

I am due to start a new job next week and can get a salary sacrifice in exchange for childcare vouchers. I am trying to work out if the vouchers work out a better deal than chilcare credits and to be honest I don't see a difference. I've read Martin's guide and he writes that if your childcare fees are more than 175 a week than the vouchers work out better always, same advice on hmrc website- but I don't find this.

My salary for year = 9240
Husband's salary = 12000
My nursery fees are 205 a week, 820 a month.

If I sacrifice 55 of my salary a week, I am sacrificing 220 a month.
I pay 17.38 a week less tax & NI in return for this, 69.52 a month.
Therefore daughter's nursery fees after the 220 a month salary sacrifice are 620 a month. For this I would get:
child tax credits = 1480.22
childcare credits = 2762.71
total credits = 4242.93
I would put all this towards her nursery fees.

If I sacrifice nothing, then I would get:
child tax credits = 1480.22
childcare credits = 3215.55
total credits = 4695.77

(note these figures are only from today's date 24/09/09 to 05/04/10)

I would love someone with more knowledge than me about this to help me out!!
Which work out better for me?

All help would be greatly appreciated x

patty666

Right - I'll take the challenge - hope i've done these sums right. Best way to see the difference is to work out your household income - childcare + tax credits.

If you use the vouchers, you'll have:-

Total Salaries = 21240
Vouchers = -2640
Refund of Tax etc = 834.24
Childcare Costs = -7800
Tax Credits = 4242.93

Total = 15877.17

If you pay for childcare yourself:-

Total Salaries = 21240
Childcare Costs = -10660
Tax Credits = 4695.77

Total = 15275.77

Going by this, you'd be around £600 better off by using the vouchers. Looks like Martin's guide is spot on here - reason being is that £175pw is the maximum CC that tax credits will consider for 1 child (and the max is 80% of this).

Hope that helps.

[Deleted User]

Use this calculator - www.hmrc.gov.uk/calcs/ccin.htm