Childcare vouchers & drop from higher to basic rate tax

Auntique

I would be grateful for any advice:

I am currently claiming and using £124 per month in childcare vouchers as I am (fortunate to be) on the higher rate tax band. I am now on maternity leave with my 2nd child and have a couple of questions:

1) When I am on weeks 27+ maternity leave and only receiving SMP, I understand that my employer should pay me childcare vouchers on top of the SMP. If so, do I have to pay these back in any way once I return to a full salary?

2) I will be on week 27 of maternity leave in mid May. If I take a year off as maternity leave, I think my salary for the 2016/7 financial year will drop into the basic rate category. Does this mean that from the beginning of the financial year (Apr 2016) I am allowed to increase my childcare voucher to £243 per month? I would then have to decrease my voucher to £124 again from April 2017.

Thank you in advance and apologies if this has previously been answered elsewhere.

Mupette

Once you drop to basic rate, ask your employer to do a basic rate assessment and amend your order accordingly, aka yes you can claim the higher amount but your employer needs to do this for you.

does your employer pay your vouchers whilst you are on mat leave? ask them as this is down to individual employers.

Savvy_Sue

Mupette wrote: »

does your employer pay your vouchers whilst you are on mat leave? ask them as this is down to individual employers.

If you are paying for your vouchers through salary sacrifice then yes, your employer must continue to pay for them for you and cannot charge you. It's one of the reasons why we decided not to offer them where I work.

I don't know about the OP's other question.

Auntique

Mupette wrote: »

Once you drop to basic rate, ask your employer to do a basic rate assessment and amend your order accordingly, aka yes you can claim the higher amount but your employer needs to do this for you.

does your employer pay your vouchers whilst you are on mat leave? ask them as this is down to individual employers.

Thanks Mupette, claiming the higher amount would really help so that's interesting to know and very helpful advice. I shall ask them to do a basic rate assessment for me. I work for the NHS so I'm pretty sure they pay whilst on mat leave, again I shall check.

rpc

Auntique wrote: »

2) I will be on week 27 of maternity leave in mid May. If I take a year off as maternity leave, I think my salary for the 2016/7 financial year will drop into the basic rate category. Does this mean that from the beginning of the financial year (Apr 2016) I am allowed to increase my childcare voucher to £243 per month? I would then have to decrease my voucher to £124 again from April 2017.

They are required to carry out a basic earnings assessment at the start of the tax year. This includes maternity leave that has been agreed/notified. If you think you will be close to the threshold, you will need to look carefully at what is and isn't included (the basic earnings assessment is, as the name suggests, rather basic).

You will almost certainly not be permitted to change your salary sacrifice level while on maternity leave but you can change it when you return provided your employer allows - HMRC do, some employers have tighter rules but it is unusual. Given your employer is footing 15 weeks or more of the childcare vouchers, agreeing to an increase while you are on mat leave is just increasing their costs.

I shall ask them to do a basic rate assessment for me.

You don't need to ask, HMRC require it for anyone claiming vouchers that isn't grandfathered in on the old rules. Your employer will do one regardless, you may want to "help" them get it right.

I work for the NHS so I'm pretty sure they pay whilst on mat leave, again I shall check.

The most common interpretation of the Equality Act is that paying vouchers on mat leave is compulsory (even when they are funded by the employer). Few employers challenge this. At one stage it looked as though it might get tested in court, but with the new system coming in that all seems to have died down.

Auntique

Thanks rpc, you've been very helpful.

onlyroz

Savvy_Sue wrote: »

If you are paying for your vouchers through salary sacrifice then yes, your employer must continue to pay for them for you and cannot charge you. It's one of the reasons why we decided not to offer them where I work.

I don't know about the OP's other question.

Considering that the employer also saves on NIC payments, and benefits from happier employees, this seems like a rather shortsighted view.

Savvy_Sue

onlyroz wrote: »

Considering that the employer also saves on NIC payments, and benefits from happier employees, this seems like a rather shortsighted view.

That point was made ...