Childcare Voucher query

Killmark

I'm trying to work out whether childcare vouchers would be worthwhile for us for the 2012-2013 tax year.

2011-2012 gross earnings £9,600 + £13,940 = £23,540 (Net Salary + CB + CTC = £23,188)
2012-2013 gross earnings £23,000 + £17,000 = £40,000 (£15,562 + £11,940 = £27,502 net after childcare vouchers )

£27,502 - £12,350 (childcare costs) + £5832 (childcare vouchers) + £1,762 (CB) = £22,746 net

As opposed to going down to one gross income of £23,000 (17,282 net), I've estimated that CTC+CB for two children would be approx £5,200 so £22,482 net)

This is based from what I've seen when trying to look for info on tax credits for 2012-2013 so not sure if I've made a flaw in my calculations but the net difference between the scenarios is +£262 per year if both parents work full time, but this of course doesn't factor in the costs of working e.g transport.

This is only reinforcing my opinion that the TC needs to be replaced with something else, but having read the UC proposals I'm not sure they are any better.

Killmark

No one with any advice or suggestions?

Icequeen99

Have you factored in that tax credits in 2012-2013 will be based on income of £30,000? (because of the £10,000 disregard if you earn £40,000).

Also, have you done a calculation that includes childcare costs through tax credits rather than taking the vouchers?

IQ

Killmark

Icequeen99 wrote: »

Have you factored in that tax credits in 2012-2013 will be based on income of £30,000? (because of the £10,000 disregard if you earn £40,000).

Also, have you done a calculation that includes childcare costs through tax credits rather than taking the vouchers?

IQ

Well disregard is dropping to £5,000 next year if recall. Using the vouchers saved approx £129 (with disregard) but perhaps I got the calculation wrong.

[Deleted User]

Last time Martin wrote a guide he said Familes with gross income less then 42k were better off using Tax Credits rather than vouchers, but that was 2011, I have no idea what will happen in 2012.

Guide here http://www.moneysavingexpert.com/family/childcare-costs

Killmark

It worked out at approx £6,455 CTC/CB without salary sacrifice on the 2010-2011 calculators but as said not sure about changes to CTC and childcare cost claims that may take affect in 2012-2013

£17,282 (salary 1) + £13,742 (salary 2) + £6,455 (CTC/CB) - £12,350 (childcare cost) = £25,129 (net income after childcare costs)

Icequeen99

Killmark wrote: »

Well disregard is dropping to £5,000 next year if recall. Using the vouchers saved approx £129 (with disregard) but perhaps I got the calculation wrong.

The £5000 disregard doesn't start until 2013-2014. So it will remain £10,000 next year.

IQ

zagfles

Deleted_User wrote: »

Last time Martin wrote a guide he said Familes with gross income less then 42k were better off using Tax Credits rather than vouchers, but that was 2011, I have no idea what will happen in 2012.

Guide here http://www.moneysavingexpert.com/family/childcare-costs

That looks a bit out of date. These days it's generally worth taking the vouchers whatever your income, assuming you get them via salary sacrifice, but it will depend on exact circumstances (eg income changes between tax years).

See the calculator - also referenced from the above.

http://www.hmrc.gov.uk/calcs/ccin.htm

But not really relevant to the OPs questions which was second earner vs SAHM, rather than vouchers vs tax credits alone.

zagfles

Icequeen99 wrote: »

Have you factored in that tax credits in 2012-2013 will be based on income of £30,000? (because of the £10,000 disregard if you earn £40,000).

Or £24168 taking off the vouchers.

Also, have you done a calculation that includes childcare costs through tax credits rather than taking the vouchers?

IQ

Or both. They'd probably be better off taking the £5832 in vouchers and claiming the rest of the childcare cost through tax credits.

zagfles

Killmark wrote: »

I'm trying to work out whether childcare vouchers would be worthwhile for us for the 2012-2013 tax year.

2011-2012 gross earnings £9,600 + £13,940 = £23,540 (Net Salary + CB + CTC = £23,188)
2012-2013 gross earnings £23,000 + £17,000 = £40,000 (£15,562 + £11,940 = £27,502 net after childcare vouchers )

£27,502 - £12,350 (childcare costs) + £5832 (childcare vouchers) + £1,762 (CB) = £22,746 net

Plus tax credits of about £7600 !!!

This would go down in 2013-14 but you'd still get about £3500.

As opposed to going down to one gross income of £23,000 (17,282 net), I've estimated that CTC+CB for two children would be approx £5,200 so £22,482 net)

This is based from what I've seen when trying to look for info on tax credits for 2012-2013 so not sure if I've made a flaw in my calculations but the net difference between the scenarios is +£262 per year if both parents work full time, but this of course doesn't factor in the costs of working e.g transport.

This is only reinforcing my opinion that the TC needs to be replaced with something else, but having read the UC proposals I'm not sure they are any better.

Icequeen99

zagfles wrote: »

Or £24168 taking off the vouchers.



Or both. They'd probably be better off taking the £5832 in vouchers and claiming the rest of the childcare cost through tax credits.

Your statement about people generally been better off with vouchers is mostly right, except where they have a lower PY income and so tax credits are based on that amount. In that scenario you don't gain the 41% tax credits due to fall in income.

So on one side you lose 70% childcare costs and on the other gain 20% tax, 12% NI where you have an award based on PY income.

Where the award is based on current year income, you get a 41% tax credit gain which makes it swing in favour of vouchers.

I think that is probably what you meant in your caveat about income.

IQ