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Tax-free childcare vs vouchers

(3 Posts)
Pumpingmummy24 Sat 26-Aug-17 16:53:06

Hi
Can someone tell me if I'm working this out correctly. I'm a higher rate tax payer but my partner will not be paying tax. Am I right in thinking that there is no benefit in the tax free vouchers as my partner is gaining nothing from then? Instead the tax free childcare (both working, im earming under 100k a year, partner earns over £120/week) would be a better option. I've tried yhe calculator and read various reviews but none seem to cover our set of circumstances. Thank you

nannynick Wed 30-Aug-17 17:48:20

Higher Rate tax payer can get £124 worth of childcare voucher per month, which I think would save you around £623 in tax/NI per year.
If you joined the scheme prior to April 2011 you may be able to save more... will assume for now that you were not in the scheme prior to April 2011.

Tax-Free Childcare is based on the number of children you have and the amount that childcare costs.

If you have one child and paid £10,000 in childcare cost, then you can save £2,000 per year (by putting in £8,000 and Government adding £2,000).

If childcare cost you £5,000 and you put in £4000, Government adds £1,000
So to get the same £623 saving, your childcare needs to cost £3115 (You put in £2492, Government adds £623).

I think that is how it works.

LazaUbi Wed 30-Aug-17 20:52:40

Nannynick is right. So it isn't really 'tax free' childcare because the saving is 20%, so you don't save on NI and higher rate taxpayers don't save 40%, only 20%. But because the saving is up to 20% of £10,000 you can save much more with this overall even as a higher rate taxpayer, if you have high childcare costs, than you could with the vouchers because the limit on the value of vouchers you can buy per month is so low.

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