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

rpc

Mupette wrote: »

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.

The information has been around for quite a while.

Currently the maximum saving for a couple with the current vouchers is just under £1900 and you can have up to £2k per child (max 20% of costs) under the new scheme.

The outline details are here http://www.moneysavingexpert.com/news/family/2014/03/new-tax-free-childcare-scheme-boosted-to-2000-per-child published nearly a year ago.

It is important to work out which scheme leaves you better off before the changeover later this year. I suspect that for a lot of people the current scheme is better because of the 20% limit on the new scheme. You need to pay more than £10k per year (which we actually do just now) to benefit from the new scheme IF you have two parents claiming the full £243 at present.

onlyroz

Mupette wrote: »

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

Depends what you use the vouchers for. I use mine to pay for after school and holiday clubs and the £243 is usually enough to cover this (based on 3 days a week at the after school club and 3 days in the holiday club for each week holiday).

girllikeme1

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

Do you earn far above the higher income tax threshold?


I ask because my husband earns just over, and managed to reduce his 'gross salary' by increasing his pension payments. He then claims £243 childcare vouchers. Effectively he earns the same amount net, by making these tweaks to take him just below the cut-off for the higher tax bracket. Worth considering.

onlyroz

girllikeme1 wrote: »

Do you earn far above the higher income tax threshold?


I ask because my husband earns just over, and managed to reduce his 'gross salary' by increasing his pension payments. He then claims £243 childcare vouchers. Effectively he earns the same amount net, by making these tweaks to take him just below the cut-off for the higher tax bracket. Worth considering.

And once you're receiving the £243 voucher rate I don't think they can then subsequently revert you back to the lower rate if your salary increases.

Crabapple

rpc wrote: »

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.

Can I ask a question about this - I wasn't in my employer scheme before I went on maternity leave and am just about to return.

I wasn't going to apply for the vouchers until April as I will have earned too little to pay tax in 2014/15. Is there actually some (I guess very small) benefit to me doing it from when I return next month instead?

fivesquare

onlyroz wrote: »

And once you're receiving the £243 voucher rate I don't think they can then subsequently revert you back to the lower rate if your salary increases.

I think the employers review it every April... so if you started getting vouchers in June 2014 and got a salary increase in September 2014 - which takes you into the higher rate taxpayer bracket - you still get the £243 vouchers until April 2015, but in 2015/2016 you get the £124 ones...

onlyroz

fivesquare wrote: »

I think the employers review it every April... so if you started getting vouchers in June 2014 and got a salary increase in September 2014 - which takes you into the higher rate taxpayer bracket - you still get the £243 vouchers until April 2015, but in 2015/2016 you get the £124 ones...

Just checked and I think I have "protected rights" because i've been claiming the vouchers continuously since before April 2011 and so I can keep the £243 vouchers regardless of my tax status.

rpc

fivesquare wrote: »

I think the employers review it every April... so if you started getting vouchers in June 2014 and got a salary increase in September 2014 - which takes you into the higher rate taxpayer bracket - you still get the £243 vouchers until April 2015, but in 2015/2016 you get the £124 ones...

onlyroz wrote: »

And once you're receiving the £243 voucher rate I don't think they can then subsequently revert you back to the lower rate if your salary increases.

They are required to do a basic earnings assessment every year and this determines what you are entitled to. There is a guide to it here: http://www.kiddivouchers.com/pdfs/Guide%20to%20Basic%20Earnings%20Assessments.pdf (HMRC have their own one, this is a bit more readable).

The important point is that the estimate is just a simple projection done in April and then it is fixed for the tax year. If that assessment indicates you are only entitled to the lower amount then that is what you get regardless of the tax situation on your P60 at the end of the year. So if you plan to rearrange your finances to claim the higher amount then that needs to be done before your employer does the earnings assessment.

Each year is independent of another so if you are on the threshold then you might find your amount changes annually.

onlyroz

rpc wrote: »

They are required to do a basic earnings assessment every year and this determines what you are entitled to. There is a guide to it here: http://www.kiddivouchers.com/pdfs/Guide%20to%20Basic%20Earnings%20Assessments.pdf (HMRC have their own one, this is a bit more readable).

Yes, this is true - I was forgetting that I am treated differently due to my protected rights (I've actually been claiming vouchers since around 2006).

DocHants

Do you still qualify for 15hrs free childcare per week (38 weeks) for 3yr+ olds as well as the 20% discount, or does this replace that?