Child care £50 tax free/both parents claim or not?

Petal_3

Wow! You seem well informed!

We're not using a voucher scheme...i'm taking a salary sacrifice for the total monthly childcare then I'm going to declare the excess (over £50pw) as a benefit on my P11D and pay tax on that...which was going to be £60pw (£110-£50) but NOW it seems that my partner can claim £50 too so my/our taxable benefit will only be £10 pw. I was talking to our accountants yesterday (who advised me to do it this way) but even they seem a little confused on the correct way to account for it.

Ah well.....all I know is.....I'm saving some money and that's gotta be good!

Baby_A

Sorry but what childcare scheme are you talking about. I was considering to go back to work but it doesnt seem worth my while as a full day childcare is about £42 (thats the cheapest I have found as I live in Central London). It leaves me with very little, so i'd rather stay at home with my 8month old.
We are struggling on my husbands wages as he is in sales and some months gets paid just enough to cover our rent.

Any help would be appreciated.

Spendless

BabyA- If your employer offers childcare vouchers you can salary sacrifice upto £50 a week and receive the equivalent in childcare vouchers. The money that you have salary sacrificed is exempt from tax and NI.

MrCow-Are all places adminstering them diff do you know? Mr Spendless is able to change the amount if he wishes (Busybee). We haven't had the vouchers yet as we missed last months deadline for contacting Busybee with nursery Ofsted reg no.

We don't qualify for childcare help under tax credit system as you both need to work at least 16 hours, and I only work 5.

Woby_Tide

Our scheme hasn't started at my work yet but hopefully will be in next few months, both me and Mrs Tide at same company and childcare will cost us £87 pw(£377 a calender month I think). What part I don't get is how much you actually would sacrifice, i.e. I could claim £200 of the £377 and Mrs Tide the remaining £177.
What would we actually sacrifice though, do I have to sacrifice £50 per week but will get £65 in vouchers(in which case we need to actually calculate a lower amount for Mrs Tide to claim), or do I need to scarifice £38.50 say to get £50 in vouchers(i.e. the £200 part of the childcare I need per month)? Bit confused!

Baby_A

Does anyone have a website with the criteria?

I am not working at the moment but would like to go back. How do I know who particapates in the scheme?

mrcow

Spendless wrote:

MrCow-Are all places adminstering them diff do you know? Mr Spendless is able to change the amount if he wishes (Busybee). We haven't had the vouchers yet as we missed last months deadline for contacting Busybee with nursery Ofsted reg no.

It must be different, depending on how your employer operates the scheme. But obviously the idea behind it is essentially the same. Mine seems to have certain restrictions, which are fine, as long as you are aware up front and stick to the rules.

My partner's company have just introduced these too, and we may switch to using them next year, as they seem a little more flexible (too late for me now!)


Woby tide, as I understand it, you can save tax and NI on up to £50 per week. That £50 comes out pre deductions, thus costing you less in real terms (as you would 'normally' have paid the deductions). So you'll get £50 of childcare for the equivalent of £38.50 as you've put it (it depends what tax & NI brackets you are in). Does that help? (Or serve to confuse more ).

In terms of how it affects the working tax credit (not child tax credit), maybe the below link helps?:

http://www.hmrc.gov.uk/manuals/eimanual/eim16059.htm

mrcow

Baby_A wrote:

Does anyone have a website with the criteria?

I am not working at the moment but would like to go back. How do I know who particapates in the scheme?

The schemes are run by individual employers, so either an employer will have a scheme, or not. The thing is where it's quite new (only introduced this year), a lot of employers are just starting to bring this type of scheme in.

From what you have described about your partner's salary situation, you'd need to look at what working tax credit entitlements apply to you before deciding whether to go for a salary sacrifice scheme.

As Smiley Mum has stated above, any childcare that is paid for your employer directly affects the childcare cost element of working tax credits, so you need to find out if you are entitled to the childcare element first. (Am I making sense? Probably not ).

Maybe posting your query on the tax credits/benefits board may help? As there are members who know a heck of a lot more about tax credits than I do (they confuse me to bits!).

£42 per day is expensive. An alternative is to look for part time work, perhaps when your partner can look after the baby? There will suitable work if you keep looking. I started with a Saturday office job when my son was 7 months, and built my hours up to include Sundays over time. I also took some evening work when things got really tight, again my partner 'babysat' (is it 'babysitting' when it's your own child?!!!)

It's really worked out for us, as we didn't have to worry about factoring in childcare costs as we weren't relying on a nursery (disadvantage is that you don't see as much of each other, but I suppose he got to spend some regular quality alone time with the baby, without me interferring!).

Don't forget too, when your little one turns three, you will be entitled to a certain amount of funded childcare (I don't mean to confuse things here, just bear it in mind).

Woby_Tide

mrcow wrote:

Woby tide, as I understand it, you can save tax and NI on up to £50 per week. That £50 comes out pre deductions, thus costing you less in real terms (as you would 'normally' have paid the deductions). So you'll get £50 of childcare for the equivalent of £38.50 as you've put it (it depends what tax & NI brackets you are in). Does that help? (Or serve to confuse more ).

Just fine, thanks for that, I think I was being daft and forgetting it was taken from gross pay etc. Just wrote it out on paper compared to how I would normally take £200 out of net pay and see how it works now! thanks for the help though.

Dovid

I have been reading this thread with interest. Has Martin produced a guide on these? From what I understand private companies provide the services and charge a percentage, so knowing who does the best deal for the company would be useful. Thanks

Anon

I considered this but as I understand it, because the money comes out before tax and NI it can affect your pension contributions - can anyone clarify this?

Many thanks

Anon