Childcare Vouchers

What are childcare vouchers?

Childcare vouchers can help you to save money with your childcare fees. They are a way of paying for childcare – through your employer. The first £50 a week supplied via childcare vouchers is exempt from tax and National Insurance Contributions (NIC) for employees.

How does a childcare voucher scheme work?

If your employer runs a scheme, this will normally be run through a childcare voucher company. The voucher company will either send your childcare vouchers directly to you, or they will provide your employer with them to distribute accordingly. Once you’ve received them you can use them to ‘pay’ your childcare provider. The childcare provider will then redeem the value of the voucher from the childcare voucher company. Some companies can send payments electronically without the use of paper vouchers.

How do childcare vouchers save me money?

To be exempt from tax and National Insurance Contributions (NIC) You can sacrifice up to £50 per week (£217 a month) of your salary. You will then receive that amount in childcare vouchers. This means you will only pay tax and NIC on the reduced level of your salary, which effectively saves money on childcare costs. An average tax payer could save over £1,000 a year. Each employed parent can claim the exemptions, so a two-parent family could save up to £2,000.

What sort of childcare can they be used to pay for?

Registered or approved childcare must be used to ensure the first £50 a week you receive in childcare vouchers will be tax and NICs exempt.

This can include Nursery and After School care.

How do I apply for childcare Vouchers?

If your employer is taking part in the scheme, you need to formally (by a change in your contract) agree to a reduction in your salary and instead receive that amount in childcare vouchers.

Your contract between and your employer will need to be updated or a signed agreement included within it reflecting the salary sacrifice agreement. This should make clear the reduction in salary you have agreed to, the time length of the agreement and the amount you will receive in vouchers.

Can all childcare providers accept payment through childcare vouchers?

Yes, as long as they have a bank account. In order to receive the childcare voucher reimbursements the childcare provider will need to register their details with the childcare voucher company. This is usually a record of contact details, registration number where appropriate and bank account details. There is no cost to the childcare provider in receiving payment through childcare vouchers