Childcare tax allowance

Spendless

nedden wrote:

I'm not too sure about how the voucher scheme works, however I do know that if your entitled to claim the CTC or WTC then you can and do get up to 70% towards your childcare costs, this can work out to be a lot of money!

nedden - you are aware that help towards childcare costs via CTC and WTC is totally dependant on your income and how much your childcare costs are aren't you.

Last year my sister couldn't get help via CTC for her twins to go to nursery part-time as her childcare costs weren't high enough for her household income.

By messing around with the 'entitled to' website i discovered that if she'd been paying out about £80 a week then she would have got a bit more CTC than just the family element of £545 p.a to put towards her nursery bills.

nedden

yes!, it is up to 70% of childcare costs....
just to clarify, you claim for Child Tax Credit + the childcare element of it, they are two separate claims that you make (altho on one form when you will it in)
So it wasn't that her child care costs weren't high enough, it would have been her household income that was too high to claim the "up to" 70%
.... correct me if i'm wrong but i think that this is what you meant,

but yes you can fall into different thresholds of entitlement by juggling things around a bit, for e.g if you work over 30 hours a week you fall into a different threshold than for example someone who just works the minimum of 16hours per week..... you can always ring the WTC/CTC helpline and get them to estimate what you might be entitled to by giving your estimated annual earnings + hours worked per week + estimated cost of annual childcare costs.

Spendless

I meant both!

Her household income is too high to get 70% off childcare costs.

Her childcare costs were not high enough for the level of income she has to get anything towards childcare costs.

If you mess about with incomes above £25,000 on the "entitled to" site, you'll see that unless you are getting high childcare costs you remain at getting the family element of £545p.a

EDIT - i've just re-read the last posts and realised i'm not making myself very clear. You can have quite a high salary and get help towards childcare costs but the amount shows up as more than the family element of £545 p.a on CTC.

My sister has a family income of around £31,000 but by putting twins in for 2 mornings a week cost of just over £40 she didn't receive any more than the £545 she already receives.

If she'd put the twins in for 4 mornings a week and incorred costs of £80 a week then she would have received roughly £885.60 CTC.

This is more than the £545 CTC, the extra £££ would have been to help with childcare.


These are rough figures but i used the entitle to website to work them out
This is what i mean about income and how high the childcare costs are.

mrcow

nannynick wrote:

Using the online calculators available at voucher providers such as Care-4, I calculate that parents who pay me £200 a month for childcare, could save £82 per month by using Childcare Vouchers provided by their employer under a salary sacrifice scheme. It's almost halfing their childcare cost - can it be true? (Note: Figures are based on annual income of £40,000, Contracted Out of NI)

Hi

I don't know if this is of any help with the above question.

I get ACCOR childcare vouchers through a salary sacrifice option at work and am paying PAYE at 22%. The money for these vouchers gets deducted from my salary before any deductions, and I also get a 5% discount from my employer.

So.....from April 2005, on £100 worth of vouchers per month, I save:

5% company discount
22% Tax saving
11% NI Saving

Total saving = 38%

(Without my company discount - total saving is 33%)
Costing me £62 only.

(Last year the tax saving wasn't in place so I 'only' saved 16%)

Even better for me (as I am on a relatively low salary) the vouchers come out of my salary monthly regularly, so I never get hit by a large nursery bill that I suddenly have to find the money for. I am registered online with ACCOR, so when I get a nursery bill, I pay immediately online and the money goes straight into the nursury manager's bank account, so it is quite efficient for them too.

From my employer's figures, employees in the 40% tax bracket save even more (as they will save 40% tax and 1% NI).

Hope it helps??

Edit.....BTW.....I'm not entitled to any tax credits due to partner's income.

Spendless

mrcow wrote:

Hi



Edit.....BTW.....I'm not entitled to any tax credits due to partner's income.

I just wondered if you'd mind clarifying.
Do you mean you don't receive any tax credits at all due to partners level of income.
Or do you mean that you only receive the family element (£545pa) or less?

mrcow

At the moment I'm not getting anything (as they overpaid me 2003/4).

As from April, I should be entitled to the £545 family element, but not entitled to any help with childcare costs through tax credits (according to the IR website).

The reason behind my post was to just point out to anyone who has the option of purchasing these vouchers through their employer, is that the savings on childcare costs are extremely significant (even if they are limited to only purchasing £50 per week/ £216 of vouchers per month).

Does this help a bit?

karenj

Just be careful, as Nannynick states - it is a change to the contract of employment therefore employment law, not tax law and once your child no longer requires childcare, you could be £50 a week worse off. From the IR website: 'Where an employee agrees to a salary sacrifice in return for a non-cash benefit, they give up their contractual right to future cash remuneration'. So who would benefit from this scheme - the employer or the employee??? Clearly the employer as they pay less NI contributions and also end up paying the employee less when it all ends.

https://www.inlandrevenue.gov.uk/specialist/salary_sacrifice.pdf

dealseeker

My employer has this set up with Care-4 and my childs nursery all set to receive part payment through that route.

Higher Rate Taxpayers
For higher rate taxpayers there was virtually no benefit last year for me 1% NI saving.

This year with the £50 tax and NI allowance I will save the £82 per month so well over £1,068 per annum saving from this. Employer picks up all administration charges and covers all benefit in kind.
It was only recently announced the change to the legislation (from 6 April onwards) so I have been late to pick up on this nd see the massive benefit this brings.

DOUBLE SAVING - both basic and Higher rate taxpayers!!
If my partner worked for firm with same arrangement we could make another claim for the same child! So remember you can double your benefit from this new allowance if both you and your partner work for employers who support the scheme! (My employer encourages it). Not bad if you can cover off £2,136 of childcare in the year compared to last year!

I set my deduction to the maximum for receiving tax/NI relief. £50 per week (£217 per month) and will pay the balance by cheque to nursery. That way no build up in overpayments and will always then get as much relief from this in future months as possible.

If your employer doesn't do it then nag them until they do! Masssive perk for staff compared to the cost to the employer and build value to the employees benefit package.

ilovefreebies_2

why is it all so complicated

dealseeker

ilovefreebies wrote:

why is it all so complicated

Not that complicated if your employer supports it and nursery accepts childcare vouchers.