Childcare Vouchers and tax

Timewarp

I'm claiming childcare vouchers to the value of £2916 per year (I joined the scheme 2017).

I didn't realise this was above the threshold for a higher rate tax payer, so on this month's payslip I noticed there was an item "Childcare Tax".

Now my question is, am I better off reducing my claim to £1488 per year for vouchers (from https://www.gov.uk/expenses-and-benefits-childcare/whats-exempt).

Or, is is the same tax overall if I keep my claim at £2916?

jimmo

Not too familiar with Childcare vouchers myself but as nobody else has replied.....
The rules for childcare vouchers normally require your employer to estimate your relevant earnings at the beginning of each tax year to decide the level at which you qualify for tax free vouchers. The normal rule is that once this estimate has been made it should not be reviewed in-year so that both you and your employer have settled figures for the complete tax year.
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim16054

I also see that there has been a change in the rules with effect from 4 October 2018 regarding eligible employees but I can't see why the change should affect you..
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim16230

That may explain why you have suddenly suffered deductions.
Suggest you ask your employer to explain why they have suddenly started deductions.

If it turns out that your employer is right its just a matter of simple sums. Are you better off receiving 60% of something (after tax) or nothing?

Timewarp

Voucher amounts are selected using a Web portal, and I think it just validates that the amount is less than or equal to 2916, regardless of salary.

So 60% is 1785.60, which is more than 1488 that would be given if I reduced my claim.

I'm guessing HMRC would have considered this loophole though, and put in a rule to prevent this?

Should my employer be required to prevent me from claiming the 2916?

sheramber

The exempt amount of £1488 will be deducted from your salary before tax and NIC are calculated.

The additional amount will not be deducted so you will pay tax and NIC on that amount.

jimmo

How much "childcare tax" were you charged?
If it was 40% of the full amount of your vouchers that would suggest that your employer has decided that you are no longer eligible for tax free vouchers because of the rule change effective from 4 October.
If it was 20% that would suggest that your employer has revised its estimate of your annual earnings and is giving you half your vouchers tax free and taxing the remainder at 40%.
It seems to me rather likely that neither of those can be correct so I think you really need to talk to your employer for an explanation of what they have done to test whether they are right or wrong.