Childcare Vouchers & Tax Credits

wegle

Hi all,

Really hoping someone might be able to answer a quick question for me and save me being on hold to HMRC.

I'm currently separating from my husband. My son is in childcare 2 afternoons a week (£40 a week) and I currently recieve childcare vouchers through work on salary sacrifice to pay for this. We are in receipt of no tax credits or benefits.

Since we are separating and I will be the primary carer my son will be going into childcare for 2 days a week (£80 a week) and I've used the calculator online which informs me that as I will be single I would be better off claiming tax credits to pay for this.

My question is, when do I need to cancel my childcare vouchers order? Before I make a claim, I presume. HMRC are sending me the claim form but said it could take a couple of weeks to arrive, and once the claim is submitted it could take up to 5 weeks to receive any payment (this would be backdated). If I cancel my childcare vouchers before I make the claim I'm not sure how I would cover the childcare until I received the tax credits.

Any advice or if you've been through similar would be appreciated.

Darksparkle

Is tax credits only definitely the best option?

For some childcare vouchers and tax credits (for the amount not covered by vouchers) works out better.

You are probably best making your claim for tax credits without childcare costs first as it could take up to 8 weeks for it to go through. Once your claim is processed, end your childcare vouchers and call them to add childcare costs.

wegle

Thanks Darksparkle. I was under the impression, it seems wrongly so, that I could not claim both. I used the online calculator on the gov.uk website which indicated for my circumstances I would be better off claiming tax credits and not using vouchers. I wonder if there is another calculator I could use to compare the difference between receiving both vouchers and tax credits or just tax credits. I'll have to do some more googling.

Darksparkle

You can't claim tax credits for the amount covered by the vouchers but can claim for the remainder.

E.g. Childcare is £347 per month and vouchers are £243 per month - you can claim tax credits on the remaining £104.

It would probably take a wee bit of working out. Entitledto is quite good.

Do you know your taxable pay before and after vouchers?

Do you have just one child?

wegle

Thanks again Darksparkle. I've just done the better off calculator again on the gov.uk website and on clicking further into the detailed results it does actually compare the difference of vouchers + TCs vs just TCs. It seems to suggest I would be better off by £218 per annum just claiming TCs. So actually not a huge amount. So I think I'll do as you suggested and put in my initial TC claim with me receiving the vouchers and then make the changes once the money has started to come through.

I do just have one child. My taxable pay without childcare vouchers is £19773. If I were to claim the maximum vouchers it would be 16893. Childcare costs without vouchers would be £347pcm and with vouchers would be £107pcm.

wegle

Interestingly on the entitled to calculator it says I would not receive any housing benefit if I continued to claim the vouchers. I wonder if that's me putting the wrong figures in for net income though. If I do the scenario of just tax credits and full childcare costs it comes out as I would get around £1000 housing benefit per year. My head is spinning!!

wegle

Ok I've done all the scenarios through entitled to and I would definitely be better off just claiming tax credits. I still haven't recevied the form yet to make the claim so I'm going to keep claiming my vouchers for the time being. Once I receive the form I think I'll give HMRC a call and ask them when it's best to stop the vouchers or if I have to stop them before making a claim for the tax credits. I might have to use my overdraft to cover the cost of childcare until the money comes through but as it will be backdated I should be able to use the backdated pay to pay off the overdraft.