Tax Credits or Childcare Vouchers???

bikermich

Our youngest is in nursery and we both work. I phoned HMRC again today because our childcare costs have increased but we are both now claiming Childcare Vouchers through work.
After 20 painful minutes of explaining it all and going through ALL the figures I asked if I was better off using the vouchers or not.
The avoidance answers were amazing - how the Tax Office can get away with bamboozling us all with figures and charts but not actually offer any help with working it out.

I asked 2 questions -
1. How do I work out if I'm better off using vouchers or claiming for childcare?
The answer was you can get up to 70% of childcare back or with Childcare vouchers you get 20& of £2600 each so that's £560 each tax free but use the on-line calculator. (which is very confusing)
2. My second question was who gets 70%? what is the allowance threshold?
I was told she couldn't/wasnt allowed to tell me as they were different factors and I would have to look on-line and work it out??????

I've been on line and its so complicated that I don't know which is best.

If we earn under £42000 but will be paying over £890 childcare a month do I claim childcare vouchers through salary sacrifice (£443 total for both of us) or will we get 70% of the childcare back?

HELP!!!

restless6

To get childcare paid via working tax credits, you can receive a payment per month of 70 per cent of your costs, but yes there is a maximum amount they will pay.

I have never used childcare vouchers through work as my childcare costs are not that high

xylophone

http://www.moneysavingexpert.com/family/childcare-vouchers

https://www.gov.uk/childcare-vouchers-better-off-calculator

Darksparkle

It's not a simple question.

In some circumstances it suits to use tax credits. In others childcare vouchers. Or a combination of the two.

It depends on the individuals specific circumstances eg household income, number of children, childcare costs.

Edit

How tax credits is calculated is based on elements, thresholds, tapers etc. This is why a calculator is suggested as explaining it to someone over the phone is near impossible.

The 70% is only for those on a low income. The higher your income is, the less assistance you get.

Childcare is an element of WTC. WTC starts to reduce when you earn more than £6420 however other elements are reduced first eg the basic element, the couple element and the 30hr element.

£42,000 is not considered a low income. So you would most likely get some help through tax credits but not the full 70%.

And this help is only likely because you have more than one child. If you only had one child you wouldn't get tax credits as the maximum income for a couple with one child in childcare is £41,000 approx. The exception being if there are disabilities in the household.

Without knowing more of the specifics I cannot do a calculation for you but if you want to post the following I'll do a calculation:
- Working hours (are both at least 16hrs)?
- Taxable Income if no childcare vouchers
- Taxable income if childcare vouchers
- Confirmation of the amount of childcare vouchers (max is £486 but you've said only use £443)
- How many children?
- How many children in childcare?
- Anyone in the household with disabilities?

aarchk

Following as I am utter confusion with this!

I am thinking I would be better off with tax credits as only my workplace offer the childcare vouchers. However I think I have to stop the childcare vouchers before I apply for tax credits and following the changes to the vouchers scheme I would not be able to reapply for them if the tax credits do not work out but would have to go on the new scheme offered.

So confusing! And lack of sleep from toddler is not helping...

Darksparkle

Have you tried the calculator xylophone posted?

Childcare voucher schemes can be used until 2018. The new tax free childcare won't be in until 2017 and will be a gradual roll out.