To not understand tax free childcare and vouchers

[wanderlove]

I cannot get my head around this! I've been on the government calculator but it just tells me what I would be entitled to not which is better. Currently receive childcare vouchers from my employer. £243 a month that is taken before tax so I save the tax on it (I think approx £60 a month). My partner is self employed so can't get childcare vouchers.

Would we be better off moving over to tax free child care? We both work full time and have three children. One is full time childcare and 2 wrap around care. Most expensive months are around £1200 and cheapest months are around £700.

I know once I move off vouchers I can't get back onto them so trying work out which is better value for us. AIBU to ask for help. I'm not stupid and usually can work this kind of thing out but this has me stumped! I know the government pay £2 for every £8 but is there a cap on it?? Please can someone help me work this out....

Yes the cap is £500 government top up every 3 months. You get an account per child though.

My DP has looked into this and decided we are better off sticking with the vouchers. I can't tell you why though as I don't understand it all myself but DP is usually good with these things.

^ unless your circumstances are exactly the same as the OP then it won’t necessarily be the same for you both.

A rough look and I think you’ll be better on TFC OP.

I think there’s a comparison calculator on moneysavingexpert website

I did that comparison calculator and it said to stick with childcare vouchers

Money saving expert has good information on this.

For us, we'd be better off on tax free child care at the minute but once the littlest one turns 3, it flips and we're better off with childcare vouchers.

The vouchers are taken off before NI as well as tax, so they are bigger % saving than the tax free childcare although you can't claim as much.

They don't make these things easy to work out.

The vouchers save you tax on 243 presumably 20% - just under 50 quid per month.
The tax free child care is also in effect 20% if they top up 2 for every 8 you've paid so on 700 that would be 140 and 1200 would be 240.

Thanks Raspberry K that's a really clear way of explaining it. So I think that it'd be about the same saving on my most expensive months but less on my cheaper months. I think I'll stick with the vouchers as I can get the 243 every month. Also we are 'peak' childcare at the moment and our bill will only go down (not for a while tho!) so the childcare vouchers will definitely be better value then.

I don’t understand your maths op- £140 on your cheapest months is quite a lot more than the current £60

If you're only saving the tax on 243 a month you would definitely be better on tfc. On a 700 a month bill you would pay 560 (so save 140 and on 1200 you would save 240- not the tax on 240

DH and I both self employed and get tax free childcare

God I don't know why I'm finding this so hard! I seem to have some sort of mental block on it! I see so on childcare vouchers the max saving is around £50. But on tax free childcare the saving is more substantial and is 20% of the total?

Can anyone who already does tax free child care clarify the system e.g does each child have their own account and then you pay them separately?

I've stuck with vouchers as I figured if they wanted rid of it it must be good ;) if you earn over £100k you can't get tax free childcare but can have vouchers if you were already in the scheme. I don't earn that but worth noting.
What bothers me is if I ever change jobs if I can still claim vouchers with a new employer who may be a different scheme 🤷‍♀️

Use the calculator to check which is best for you. For us, 1 in ft vouchers was best, but once it went over that the tax free was.

For tax free, you can have an account for each child and anyone can pay in to it. As both DC use the same childcare provider, we alternate which account we pay from each month, saves having to do two payments, but you could do two if you prefer.

I don't really know what's better but I changed jobs last year and so lost my option to have childcare vouchers and had to move to tfc.

You set up a government gateway account and then have one per child. My kids go to different childcare providers so I pay different amounts in. Then I get the top up on each. Then when I'm ready I transfer to my childcare providers.

I think I did prefer paying out of my salary directly with the vouchers, so that it was taken out automatically but it's very straightforward with tfc. I also like being able to pay in different amounts at different times, eg paying less when we've been on holiday etc.

Hi Castle--which calculator are you using? I've been on the gov one and money saving expert websites but can't find a calculator

Each child has an account a bit like a bank account. You or dp pay money in and everytime you pay in the govt tops up the balance up to a cap of £500 per quarter per child. You can vary what you put in each month or how often you pay in.
If you paid £800 in, the top up means you have a balance of £1000 available and would be able to pay a childcare bill of £1000. When you want to pay for your childcare, you make a payment like you do with online banking.
You can't use child 1's account to pay for childcare for child 2 though.
Like vouchers, you can pay in and use the balance later, eg school holidays cover.
You could save £1500 a child a quarter if you paid the maximum amounts in but you might not need that much for your older two.

I think the vouchers are better for higher earners however we use tfc as voucher scheme not available at employers

stupidly only started claiming for tfc in the last 2 months so have missed quite a chunk of money.

This explains very clearly, OP (and I think says you'd be better off with TFC)

Thanks so much everyone I feel like I'm getting my head around it. So for example dd3 is in full time childcare at £560 pm. So I could put £448 in the account and government would top up the last 20% to £560. Saving of 112? Dd2 and dd3 both have wraparound care of approx £216 per month so according to my maths i put £172 in (80%) and the government will pay the last 20% approx £44. So in total I owe 992 in childcare and I would pay about 700 and the government around £200? So actually on these figures I would be up about £150 on the childcare vouchers saving of £50? Does this sound right? If so I'm signing up for a tax free childcare account now!

See over a year my childcare is around 10,000 as I'm a teacher so some months I pay much more then others and that info graphic just confused me and seemed to suggest it was much of a muchness---whereas the breakdown I just posted seemed like a massive difference

That is how it works, in terms of you putting it in and topping up. I think it's much better for you because your DH is self-employed and so has no vouchers but counts for tax-free childcare.

Vouchers are a con.

Just make sure that your childcare providers are registered to receive the tax free childcare payments.