Childcare vouchers, advice please

DrPips

Hi All,

I'm just about to sort out childcare vouchers for our 18 month old (don't ask why it's taken so long to sort out!) I'm just looking for a bit of advice as to the best way of doing it. Both my wife and I's employers offer them as do our childminder.

We would require about £250 a month in vouchers, but my wife is on the upper tax bracket. How much should we get each to maximise our savings? She is much more limited by the amount she can get than I am due to being a 40% tax payer.

Thanks,

Dom

kiddakidda

DrPips wrote: »

Hi All,

I'm just about to sort out childcare vouchers for our 18 month old (don't ask why it's taken so long to sort out!) I'm just looking for a bit of advice as to the best way of doing it. Both my wife and I's employers offer them as do our childminder.

We would require about £250 a month in vouchers, but my wife is on the upper tax bracket. How much should we get each to maximise our savings? She is much more limited by the amount she can get than I am due to being a 40% tax payer.

Thanks,

Dom

She will get £124 per mth max and she would probably need to arrange through salary sacrifice (her employer)

And if you are on the lower tax bracket you will get £243 per mth max

DrPips

kiddakidda wrote: »

She will get £124 per mth max and she would probably need to arrange through salary sacrifice (her employer)

And if you are on the lower tax bracket you will get £243 per mth max

Yep, I understand that, but as we would only need approximately £243 per month, would we be financially better off by me getting all of them, or my wife getting her £124 and me making up the rest, or is there no difference?

Thanks,

WestonDave

If your wife takes £124 worth of vouchers she will save 40% on that whereas you'd only save 20% on it so her taking them saves more tax than if you take your full allowance. Another thing to think about is whether her taking a salary sacrifice for vouchers is relevant in bringing down her income enough to save any child benefit you might lose due to the changes in that for higher earners. That starts to kick in at £50k so if her income is above that, taking some childcare vouchers would reduce her income and potentially save some child benefit.

kiddakidda

DrPips wrote: »

Yep, I understand that, but as we would only need approximately £243 per month, would we be financially better off by me getting all of them, or my wife getting her £124 and me making up the rest, or is there no difference?

Thanks,

Of course, if your total childcare cost is only £250 it goes without saying your claim cannot exceed that amount.

How you spilt it makes no odds in terms of joint tax relief. Either you claim 243 and your partner claims 7 quid. Or your partner claims 124 and you claim 126 the amount of benefit is the same.

kiddakidda

Why is this in mortgages and endowments?

WestonDave

kiddakidda wrote: »

Of course, if your total childcare cost is only £250 it goes without saying your claim cannot exceed that amount.

How you spilt it makes no odds in terms of joint tax relief. Either you claim 243 and your partner claims 7 quid. Or your partner claims 124 and you claim 126 the amount of benefit is the same.

That's not correct. If he claims £243 then the tax saving is £48.60 with another £2.80 on the balancing £7. If she claims £124 then the tax saving is £49.60 with another £25.20 on his balancing amount. So her taking the max makes them £23.40 per month better off and potentially more if it saves some child benefit as well.

DrPips

Haha, this is why I'm getting confused. Who's right? Kiddakidda who says it doesn't matter, or WesternDave who says we'd save more if we split it? She gets under £50k so no need to worry about anything else.

Thanks,
Dom

DrPips

WestonDave wrote: »

That's not correct. If he claims £243 then the tax saving is £48.60 with another £2.80 on the balancing £7. If she claims £124 then the tax saving is £49.60 with another £25.20 on his balancing amount. So her taking the max makes them £23.40 per month better off and potentially more if it saves some child benefit as well.

I'm convinced, thanks. And as to why it's under mortgages, I have no idea, I followed a similar post on childcare vouchers which was under something to do with tax. Sorry

kiddakidda

WestonDave wrote: »

That's not correct. If he claims £243 then the tax saving is £48.60 with another £2.80 on the balancing £7. If she claims £124 then the tax saving is £49.60 with another £25.20 on his balancing amount. So her taking the max makes them £23.40 per month better off and potentially more if it saves some child benefit as well.

You are right, and congratulations on passing the test. My tax returns have been sent to you for completion.

kiddakidda

DrPips wrote: »

I'm convinced, thanks. And as to why it's under mortgages, I have no idea, I followed a similar post on childcare vouchers which was under something to do with tax. Sorry

Good luck with them. They are worthwhile.