Childcare Vouchers: cut childcare costs by £1,000/year Discussion Area

rpc

bunyip wrote: »

Hi

Im new to the childcare scheme and am struggling to get an answer to a question from my employer -

I have returned from maternity leave and whilst previously I was a full time basic rate tax payer I have returned on part time hours. I set the scheme up with my employer as apposed to my partner who is also a basic rate tax payer but on a full time basis. As my income is now considerably lower obv my tax is much lower and when I have checked my payslip for the childcare scheme it doesnt seem to have given me much net benefit? My question is should we have set this up from my partners employer or as we are both basic rate tax payers does it not make any difference?

What is your income and how much do you claim in vouchers? The benefit cannot be more than the tax & NI you pay so if you are just over the threshold then the benefits will be reduced.

Assuming that you claim the vouchers and there is still tax left to pay, it doesn't matter who gets them as both will receive basic rate relief. The only difference is where one person does not pay basic rate tax (i.e. no tax or more tax).

onlyroz

bunyip wrote: »

Hi

Im new to the childcare scheme and am struggling to get an answer to a question from my employer -

I have returned from maternity leave and whilst previously I was a full time basic rate tax payer I have returned on part time hours. I set the scheme up with my employer as apposed to my partner who is also a basic rate tax payer but on a full time basis. As my income is now considerably lower obv my tax is much lower and when I have checked my payslip for the childcare scheme it doesnt seem to have given me much net benefit? My question is should we have set this up from my partners employer or as we are both basic rate tax payers does it not make any difference?

Thanks

The tax saving is 20% of the value of the voucher. You know that *both* of you can claim them, don't you?

PaulCon

I'm exhausted from getting no straight answers from HMRC phone lines or web so I was hoping someone could help answer a basic question on Childcare Vouchers?

I'm a basic rate tax payer in terms of salary so that should mean I can make a salary sacrifice of up to £243 to make the most savings/ get the most vouchers. However, I also rent properties and come tax return time that throws me over the threshold making me a higher rate tax payer.

So, my question is this - Do Childcare Vouchers take into account only the income from your employer as it's a work-related benefit (in which case I can make more savings of course) or all income (in which case I can only make half the saving using childcare vouchers as I would be higher rate)?

Thanks so much

rpc

You aren't a basic rate taxpayer at all. The fact your salary is under the threshold is irrelevant - tax is worked out on annual earnings.

If you pay higher rate tax (you do) you are only entitled to basic rate tax relief. I have no idea how you can make this work - your employer will give basic rate relief on £243 and you will have to work it out to reduce the relief on your tax return I imagine.

You are entitled to basic rate tax relief on £243. Most voucher companies implement this as £124 vouchers when a higher rate salary is sacrificed (which actually reduces the benefit further than required due to NI). You are absolutely not entitled to higher rate tax relief on £243 which is what you are suggesting. (edit: unless you have grandfather rights because you joined prior to 6/4/2011)

PaulCon

rpc wrote: »

You aren't a basic rate taxpayer at all. The fact your salary is under the threshold is irrelevant - tax is worked out on annual earnings.

If you pay higher rate tax (you do) you are only entitled to basic rate tax relief. I have no idea how you can make this work - your employer will give basic rate relief on £243 and you will have to work it out to reduce the relief on your tax return I imagine.

You are entitled to basic rate tax relief on £243. Most voucher companies implement this as £124 vouchers when a higher rate salary is sacrificed (which actually reduces the benefit further than required due to NI). You are absolutely not entitled to higher rate tax relief on £243 which is what you are suggesting. (edit: unless you have grandfather rights because you joined prior to 6/4/2011)

Thanks, I figured that would be the case. Appreciate the confirmation.

BargainhunterII

My partner brought home a leaflet last week top say that his employer is now in a childcare voucher scheme. Can we benefit from the vouchers if only my partner is working? I am not currently working but my son starts nursery soon for 3 sessions and I hope to find some work to tie in with that! Thanks.

rpc

BargainhunterII wrote: »

My partner brought home a leaflet last week top say that his employer is now in a childcare voucher scheme. Can we benefit from the vouchers if only my partner is working? I am not currently working but my son starts nursery soon for 3 sessions and I hope to find some work to tie in with that! Thanks.

Yes. Vouchers are per-parent so your partner will get the tax relief if he claims vouchers. If you get a job and claim more vouchers, you will both get tax relief.

The only case where you may not benefit is if you get the childcare element of tax credits - childcare vouchers can reduce this more than the tax relief they provide.

Seventh

Hi, I'm hoping someone can give me a little help.

My 2 year old is in nursery 3 times a week with a total monthly cost of £557.81. We receive tax credits of £81.16 a month and both my husband and I are eligable to claim £243 in vouchers a month.

Does anyone know which way we would be better off? This is a big thing to change and seen as our tax credits have decreased from just under £400 since April we have a large deficit to fill.

Thanks in advance

rpc

Do you receive the childcare element of tax credits? If so, vouchers are not normally a good idea unless you are spending more than the cap.

The best thing to do is to run through the benefits calculator using figures from both scenarios and compare.

Seventh

rpc wrote: »

Do you receive the childcare element of tax credits? If so, vouchers are not normally a good idea unless you are spending more than the cap.

The best thing to do is to run through the benefits calculator using figures from both scenarios and compare.

Hiya, that is all we currently receive. I've had a look at the calculator and it seems to think we would be better off on vouchers. I've put it all into my little spreadsheet using figures I've taken from a salary calculator and it looks like we come out on top! Woop! Its about time with all this financial worry!

Thanks for taking the time to reply