Childcare Vouchers or Tax Free for Company Director

tekton23

Hi,

I am a director of a small LTD company, i pay myself a basic salary up to the personal allowance and the rest in dividends. My salary and my wife's certainly does not exceed £100k.

I am trying to understand which is better for me, childcare vouchers or Tax Free Childcare?

Am I classed as self-employed and therefore only eligible for the TF Childcare route?
As I am only paid a minimal salary, would I need to increase my salary to account for the voucher payments?

The main point I have difficulty understanding, is that as I only pay very little tax anyway (0% on my salary and 7.5% dividend tax on any profit after that) what is the benefit of using the voucher scheme to me? Surely the Tax Free Childcare route is better in this case, as this way the governments pays 20p for every 80p that I pay.

Thanks,

T23

tekton23

Difficult to find an answer anywhere else on this. Any ideas?

Mupette

Vouchers will only benefit if you earn tax to salary sacrifice on.

Saveroo

Hello, We are in the same boat so my story might help - i'm employed and my employer offers the salary sacrifice voucher scheme. My husband is a company director, self employed (it's just him). He asked his accountant if it was worth him setting up his own childcare voucher scheme and the accountant said no (presumably not tax efficient). I recently opted out of my employer's voucher scheme and switched to TFC as we meet all the advertised critera... only to find out (one month in) that my husband needs to show monthly income by paye. He doesn't have this as he's paid in dividends (it's just him, so there's no need for the accountant to do payroll). No doubt the cost of his accountant organising monthly paye payments will be substantially more than any TFC savings (grrrrrrrr!) so now i'm out of pocket paying full price childcare until i can re-sign up to my employer voucher scheme. SO annoyed. Wish they would make this clearer when you apply! Such a waste of time. Hope this helps others in the same situation.

Scorpio33

For you and you alone, the vouchers won't be available to you as you need to have earned and paid PAYE tax to make it beneficial, so that only leaves the TFC account as your only option. That does have some issues, such as proving you income, but is your only option on your own.

However, if you have a TFC, it means that no one in your household can have the vouchers, so if your other half has vouchers now, they couldn't if you opened up a TFC account, which means you will lose out.

Personally, I would have thought the TFC account is more beneficial to you, but without knowing all the details it is difficult to be sure.

sheramber

Saveroo wrote: »

Hello, We are in the same boat so my story might help - i'm employed and my employer offers the salary sacrifice voucher scheme. My husband is a company director, self employed (it's just him). He asked his accountant if it was worth him setting up his own childcare voucher scheme and the accountant said no (presumably not tax efficient). I recently opted out of my employer's voucher scheme and switched to TFC as we meet all the advertised critera... only to find out (one month in) that my husband needs to show monthly income by paye. He doesn't have this as he's paid in dividends (it's just him, so there's no need for the accountant to do payroll). No doubt the cost of his accountant organising monthly paye payments will be substantially more than any TFC savings (grrrrrrrr!) so now i'm out of pocket paying full price childcare until i can re-sign up to my employer voucher scheme. SO annoyed. Wish they would make this clearer when you apply! Such a waste of time. Hope this helps others in the same situation.

The requirements of the scheme are clearly stated in the information supplied
https://www.gov.uk/help-with-childcare-costs/tax-free-childcare
For tax free child care both of you need to earn at least £120 per week.