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

danadanny

Hi,
I need some advice with regards to child care vouchers.

I currently pay higher rate income tax.

As I am under the higher rate, I am only entitled to £124 of vouchers per month, which is insufficient to cover the monthly cost of childcare.

My wife works part time and earns about £9,400 annually, which is less than the tax free allowance.

Does it make sense for her to apply for childcare vouchers to top up the remaining amount, which will further reduce her annual income and leaves more tax free allowance unused?

Thanks

rpc

Unused tax allowances are wasted. There is no benefit to leaving more of a tax allowance unused.

If she doesn't pay income tax, there is no tax saving on vouchers.

I think there is a small NI benefit to her (no more than about £175 per year, no benefit above £120 per month vouchers which takes her to the PT).

danadanny

rpc wrote: »

Unused tax allowances are wasted. There is no benefit to leaving more of a tax allowance unused.

If she doesn't pay income tax, there is no tax saving on vouchers.

I think there is a small NI benefit to her (no more than about £175 per year, no benefit above £120 per month vouchers which takes her to the PT).

So are you suggesting that I pay the remaining £180 (£304 - £124 voucher) by cash?

thriftylass

aimex wrote: »

Hi there


I wonder if anyone can help me. OH works for NHS. I am a SAHM and we have 2 children. DS1 will start playgroup 2 mornings a week from January (will be 2.5) but will qualify for the 15 hours free from next September. So we only have to fund nursery from Jan to July 2015 at a cost of approx. £500. Just wondering if it is still worthwhile (and not a pain in the butt) to apply for vouchers through OH's employer? Is it a long winded process? and is it easily undone Ie can you just apply for the amount you need and that's it? Sorry new to this whole process.


Many thanks

It's an really easy pretty much instant process as far as I remember, but that was with the old system. Just speak to HR at your husband employer and they'll set it up.

danadanny wrote: »

So are you suggesting that I pay the remaining £180 (£304 - £124 voucher) by cash?

Childcare vouchers aren't meant to cover the childcare cost, they only help save a fraction of the cost by saving tax. we're on the old system i.e. get each £246 vouchers = 492, but our childcare costs are £1400 for two kids so I still pay out £1000 from my salary.

rpc

danadanny wrote: »

So are you suggesting that I pay the remaining £180 (£304 - £124 voucher) by cash?

I'm suggesting that there is no benefit to your wife claiming childcare vouchers beyond the amount that take her to the PT.

She can take childcare vouchers in excess of this, but there is no benefit over cash. You may be able to claim additional vouchers, but without grandfather rights they will be fully taxable and NI-able.

Personally, I'd pay cash in your situation.

Mjwax

Hi

I began claiming the £243 worth of childcare vouchers from July 2014 for my first child. I have been lucky to have been paid in full for the 1st six months of my maternity leave so decided to claim vouchers for this period, and stop them when the EMP ended. I have since discoverd that the employer should also pay for the vouchers on my behalf when SMP kicks in so have restarted them. I was not told this by my employer, but by my colleague who is claiming reimbursement from the company who deducted these monies from her when her EMP ended. Is this always the case that the employer pays, as I am concerned they make take money out of my SMP.

Secondly, my HR dept has contacted me after I queried the deduction of £124 worth of childcare vouchers shown on my payslip as opposed to £243 I had set up. It turns out that for the five months I thought I'd been paying for the vouchers in full, only £124 has been paid and I've been undercharged £119 per month, and the firm are now asking me for £595 back. They are wanting to take this out of my salary (which I am not receiving at the moment). This is an expensive mix up for me. Can my firm ask for this, seeing as I set this up correctly in the first place and this is not my fault.

Thank you

Mupette

Be aware that the new childcare vouchers this year with NS & I are not going to be available to all, some will not be better off.

I work for a big childcare voucher service company, and its only now little information is being filtered through to us about the government run scheme.

If you are not claiming through work now, don't leave it too late, Once the new ones start, and you find its not for you or you don't benefit, then you will NOT be able to join any existing scheme run by your employer. Thats the important thing to know about now,

Company i work for have just sent emails out to their parents (check spam junk mail as emails that are web based are seeing these emails as spam) most childcare voucher companies are also using their face book / twitter accounts to give out information, to help parents know what changes are going to happen and how it affects them, so anyone taking vouchers i urge you to contact your voucher supplier or your employer who can contact the childcare voucher suppliers, time is running out and once the new ones start, so many will miss out, self employed may not qualify under the new scheme, so it really is important that people spread this to make sure they know their facts. New rules are going to be in place to stop new registrations to current childcare voucher companies, so if you find the new childcare voucher service is not for you, don't leave it too late to register with current childcare voucher schemes through your employer

Mupette

danadanny wrote: »

Hi,
I need some advice with regards to child care vouchers.

I currently pay higher rate income tax.

As I am under the higher rate, I am only entitled to £124 of vouchers per month, which is insufficient to cover the monthly cost of childcare.

My wife works part time and earns about £9,400 annually, which is less than the tax free allowance.

Does it make sense for her to apply for childcare vouchers to top up the remaining amount, which will further reduce her annual income and leaves more tax free allowance unused?

Thanks

I doubt that she will be able to claim, as she needs to pay tax to claim, Vouchers never cover the full childcare fees, but go towards it, the higher you earn the less you get in vouchers.

rpc

Mjwax wrote: »

I have been lucky to have been paid in full for the 1st six months of my maternity leave so decided to claim vouchers for this period, and stop them when the EMP ended.

Which wasn't the most sensible way to do it.

I have since discoverd that the employer should also pay for the vouchers on my behalf when SMP kicks in so have restarted them.

Your employer is not obliged to permit contractual changes while you are on mat leave. Starting up vouchers while receiving SMP could mean that they can charge you for them.

Is this always the case that the employer pays, as I am concerned they make take money out of my SMP.

They cannot deduct non-cash benefits from SMP and it is generally interpreted that they must continue to provide them. Some employers and providers are starting to question whether this is the case, but there is no binding case law.

The generally accepted position is that if you receive childcare vouchers when you begin SMP, you must continue to receive them during SMP. Deductions can be made from contractual maternity pay, but not SMP.

It is believed that to do otherwise would breach the Equality Act, but this is only a belief. Some employers are starting to question this, particularly as some employees are taking the mickey by doing things like start vouchers just before mat leave and stop them just after so the employee pays next to nothing and the employer is funding the lot.

Employees who claim vouchers long term usually save the company money because the employer NI saving ends up being more than the cost of vouchers while on SMP.

I've been undercharged £119 per month, and the firm are now asking me for £595 back. They are wanting to take this out of my salary (which I am not receiving at the moment). This is an expensive mix up for me. Can my firm ask for this, seeing as I set this up correctly in the first place and this is not my fault.

Just because they got it wrong, doesn't mean that they aren't entitled to correct it. It shouldn't be an expensive mistake because you shouldn't have had that money in the first place so presumably didn't spend it. If you did spend it, you have spent money that wasn't yours.

What you do need to ensure that that you only lose the net amount. It would be totally unreasonable for you to give them a cheque, for example, because you should have saved tax and NI. Either they have to foot the cost of the tax/NI or agree some method with the taxman. You only owe them £404.60 out of your net salary.

rpc

Mupette wrote: »

I doubt that she will be able to claim, as she needs to pay tax to claim

You can claim on any salary as long as you don't breach minimum wage.

That most schemes don't let you claim more that the tax exempt amount and you don't necessarily save on tax/NI if you don't earn enough is by the by. The rules permit it.

As I showed above, she won't save any tax but there is also the NI saving down to the PT which she can still receive.

Vouchers never cover the full childcare fees, but go towards it

Not necessarily true. We paid my son's nursery entirely out of vouchers and had spare at one point. In fact, I claimed vouchers before he had started nursery.

the higher you earn the less you get in vouchers.

The only change happens when you cross tax bands. Changes in salary within a tax band have no effect on your voucher entitlement.