To not understand the difference between tax free childcare and childcare vouchers

[Butttons]

I'm really puzzled. We're considering changing nurseries for DC2. We currently both pay into the childcare voucher scheme which the current nursery accepts. The new nursery, which is ofsted registered, has informed us that they don't accept vouchers but use the tax-free scheme. I'm confused, does anyone know the difference? I've tried looking this up online but just keep getting more confused. Can anyone enlighten me please? Thanks

They are just different schemes. Have a look at the childcare choices website. However if the nursery don’t accept vouchers, I don’t see you have a choice? It’s Tax Free Childcare or nothing isn’t it?

Child care vouchers are being phased out that’s all... most places are therefore taking tax free vouchers rather than child care vouchers.
In terms of savings it’s up to 20% of childcare cost.

How old is your DC, remember at aged 3 you get your free hours as well

But I thought all ofsted-registered nurseries had to accept vouchers.

I am also not sure I want to leave the vouchers scheme as we can't rejoin again now.

Thanks for the nudge to childcare choices I'll take a look!

No provider has to accept vouchers or funding of any kind.

@Mondaytired will turn 3 over Christmas so we'll be eligible for the 30hrs in Jan the only way we can afford this nursery is if we have the 30hrs and some sort of tax free saving

This MSE Guide is good.
www.moneysavingexpert.com/family/tax-free-childcare/#vouchers

As I understand it, there's no meaningful difference unless your household income is over £100k. If that is the case, the childcare vouchers will still save you some tax, the tax free childcare doesn't give any advantage. Sorry if that's garbled, I got rather muddled myself trying to figure it out!

Yabu . Just read about it. Though it's 100k for an individual income not household I thought.

Why is there no meaningful difference? I worked out I'd save £400 a year on childcare vouchers vs £200-odd on tax free. Did I fuck up the calc?

Tax free childcare worked out better for me than the company scheme of childcare vouchers. I get 25% for tax free childcare and vouchers worked out at 20%. We could have been entitled to childcare element of child tax credits (not now as it's a UC area) but that worked out less than we would save with tax free childcare. I think the calculations were about £850 per year on tax credits and £1400 on tax free childcare.

The website to pay and manage the scheme is a complete ballache but it seems to work well for us. I just can't wait till she is 3 and we get 30 hours free it will be amazing to not struggle every month and panic if we get an unexpected bill. We will still fund 18 hours a week but that will be a huge drop from 48 hours! And our childcare is term time only so it will be a massive difference for us.

But I thought all ofsted-registered nurseries had to accept vouchers.

Absolutely incorrect. Any business can choose how and what payments they accept. Not sure why you think nurseries would be any different.

As far as I am aware you can’t have both tax free vouchers and 30 free hours, it’s one or the other.
As far as I am aware from April 2018 the shift went to tax free and vouchers are being phased out so places won’t accept them anymore

I take that back you can use vouchers and tax free at the same time...

www.childcarechoices.gov.uk

Mondaytired you’ve confused the schemes together there.

Childcare vouchers work out better for us. It depends on your circumstances. There are a few website where you input your wages etc and it tells you which is best for you. Not much use if you're definitely moving to that nursery though!

For my circumstances when both me and ex were entitled to vouchers it was better ( both snuck into the lower tax bracket) but when he moved job and wasn't eligible then tax free was better

I think people are missing the point.

@divadee how do you get 25% for tax free childcare? I thought it was a set 20%?

For every £8 you put in, the government adds £2 so I guess it’s how you do the maths....

Childcare vouchers come out of your salary to pay the nursery. With tax free childcare you have a childcare account which you upload money to and the government add back the tax you would have paid on that money. You then pay the nursery from that account. It’s pretty simple to apply for and use. As far as I was aware both schemes are pretty similar although there are certain scenarios where one may work out slightly better than another. I think Martin Lewis had a bit on his website about the difference. Doesn’t sound like you have any choice if the nursery don’t accept the vouchers though. Google tax free childcare. Set up your account. It’s easy.

I'm surprised the nursery doesn't not accept CVV - not very family friendly!! I'd have a chat with the manager on it - some parents still have and need CVV.

It is a choice - both cannot be claimed at the same time.

For the benefits - they are very much meaningful depending on the childcare costs and family situation. With CVV you can only save a max of 1.8k across the year approx assuming 2 sets of the max of 243/months CCV.( saving per parent is abt 930 per year)
with tax free childcare you can save 20percent of your childcare costs up to 10k childcare costs per child per year. so max saving of 2k per child per year. A family can save 6k at most. much more than 1.8k surely!!
for me my childcare costs for 3kids are about 1300 per month, 15k per year roughly (1 FT nursery, 2 in afterschool club) so i save over 3k per year. Much better than CCV especially as my husband is now a higher rate taxpayer so he wouldn't qualify for as much CCV anymore anyway.

When we compared the two, I'm sure the new tax free account scheme worked out better if nursery fees were more than about £9000 a year. We're about £8000, so went with the vouchers as I prefer the money to come straight out of my wages.

One big difference is you can only use the new scheme up to and including 11 years old. The old scheme went up to 15. If your children are very young now that won't seem a big deal, but you can't leave a 12 yo on their own throughout the 6 week school summer holiday, and the old style vouchers can be used for holiday clubs, including residentials like PGL.

No way I'd be giving up my entitlement to vouchers when they are worth more than the new scheme in the long run.