Childcare tax allowance

karenj

Dealseeker, I think you miss my point. All well and good getting the vouchers now, but what happens when childcare finishes??? If you have made a 'salary sacrifice', the company is not obliged to up your salary by the amount you had in childcare vouchers. Look at this long term, not just for the interim period. Believe me, you will lose out in the long term.

dealseeker

karenj wrote:

Dealseeker, I think you miss my point. All well and good getting the vouchers now, but what happens when childcare finishes??? If you have made a 'salary sacrifice', the company is not obliged to up your salary by the amount you had in childcare vouchers. Look at this long term, not just for the interim period. Believe me, you will lose out in the long term.

Good point but the childcare vouchers scheme at my work is part of a flexible benefits package along with other benefits we are entitled to choose.

My base salary is fixed and will not change therefore "sacrifice" is simply an election made by me for the remainder of this year which is renewed annually. I get to choose the package of benefits at each election. Essentially my "contract of employment" varies each year.

True this may be relevant for others and you are right to keep banging on about it.

Murphy_The_Cat

As an employer (and a parent) can i add my own thoughts and experiences here ?

I administer a salary sacrafice scheme at my business for both pension and childcare contributions.

It is a complete pain in the bum to administer as it makes every participent a "special case". A good example is the much lower rate of overtime that will be paid to someone who has elected to sacrafice so much of their salary and cannot now understand why they are getting paid so much less for the same overtime. Another example is this time of year when P60s are being handed out and people pull their mush at how much they have been paid during the year - because they have forgotten about how much salary they have sacrificed (all they understand is that their friend is earning x thousand pounds more for the same job - whoops forgot about the salary sacrafice).

It is undoubtedly a good deal for the employee - for the employer it's the usual story, extra work for sod all reward.

By all means try and persuade your employer to take up the system but don't expect him/her to agree without a goodly amount of persuassion.

MTC

p.s. don't forget that if you are applying for a mortgage the figure that the lender is interested in is the P60 figure not your P60 plus salary sacrifice. The difference on your mortage application could be large and make the difference between acceptence and rejection.

jenmattsambex

Woah Woah Woah! hold it right there! This is my first post as I have read with interest the majority of this site and found it quite frankly the best thing I've seen in ages! However, I have to tell everyone who is thinking about subsidising their wages for childcare vouchers to be bloody careful, they aren't as good as they first seem. When I first heard about them I got really excited, I thought, great, more money! BUT... What they don't tell you is that you cannot claim tax credits and the vouchers and in actual fact, those who are paying the basic tax rate will be worse off than if they are claiming tax credits. I will try and explain a bit better, (had a few cheap tesco wines thanks to the voucher section!) As previously mentioned, some of us can claim up to 70% of our childcare costs, this can equate to quite a lot per month, go on, work out how much you get!!! if you were to then substitute your wages for childcare vouchers, the most you would get (if you were a basic rate tax payer) is £68 per month if you were to claim the full £217.
As I said, do your maths, but generally, if you recieve tax credits, you're likely to be worse off.
If you are a higher rate tax payer and claim vouchers, the maximum you will recieve is £88 - if you don't recieve tax credits or minimal tax credits, you will be better off!
DON'T LET THE GOVERNMENT STITCH YOU UP!!!!!!!!!!!!!!!

Spendless

I am extremely grateful to this thread as I recently found out that hubbys employers offer them.

I've looked into the drawbacks and as far as I can see they do not apply to us.
We are only entitled to the family element of CTC and since we have to add on 'benefits in kind' to hubbys income it is highly unlikely that we would qualify for any help with childcare costs via tax credits.

Our mortgage is low so even re-mortgaging on a salary sacrificed amount wouldn't make any difference.

Hubby is going to talk to his HR dept about it as we are already paying for daughter to attend nursery one afternoon a week-it would cost us less to do it via this scheme.

jellyhead

it looks like a good idea. i'm considering going back to work next year but would have to put one child into childcare. will get hubby to ask about these vouchers at his work

paddytt

Just got myself all worked up over my wife's Self Assessment and her Childcare Vouchers, which turns out (I think!) to be nothing to worry about... but maybe someone can confirm that we're in the clear?!

Her payslip shows Gross Pay before the deduction for the Childcare Vouchers, with taxable pay shown after the deduction. The vouchers are shown as a deduction alongside pension etc.

Well I panicked because I thought that the Gross Pay was what was shown on her P60, and that we had entered this on her Self Assessment, and forgotten to allow for the value of the vouchers on the SA.

However, the P60 amount is shown after the deductions, so I guess that
the SA doesn't need any info added regarding the vouchers? I would hate to have paid tax after using them for so long to save tax!! The reason she has to fill on an SA is because of income from a rented house. She is a basic rate taxpayer.

thanks

TT

NeilW

We are only entitled to the family element of CTC and since we have to add on 'benefits in kind' to hubbys income it is highly unlikely that we would qualify for any help with childcare costs via tax credits.

Strange as it may seem, if you actually claim for your cost of childcare in the working tax credit you may end up with more Child Tax Credit as a result because of the way the clawback mechanism works.

The maximum amount of Working Tax Credit for childcare is £12,480 for 2 or more children in childcare costing more than £300 per week.

If you claim this, then even if you don't get a penny of it it offsets £33,729 of family income in the clawback system, which means that isn't available to be charged against the Child Tax Credit individual elements.

A family with both parents working over 16 hours and two kids in full time childcare costing over £300 per week would need to have a family income of nearly £60K before they stopped getting the higher rates of Child Tax Credit.

That's why you have to think very carefully before accepting childcare vouchers, or having your employer pay your childcare costs. I would only accept them if they reduce the amount of childcare costs to the *maximum* available under the Working Tax Credit system. (ie your two kids childcare is more than £350 per week, vouchers then reduce that to £300 per week) Don't reduce it any further, because if you qualify the state already picks up the tab.

The lesson here is *always* claim everything you are entitled to - even if you think you won't get a penny. The Tax Credit system calculations (and the interaction with childcare vouchers) are so complex that the thing exhibits emergent behaviour!

NeilW