Childcare Vouchers V Tax Free Childcare

[MrsWarleggan]

Posting here for traffic.....

I need real life examples of how the Tax Free Childcare system works. I know all the gumpf is online, but I can't make head nor tails of it and just need it put into simple terms!

I am currently claiming the full £243 in vouchers from Sodexo. We have had to put DD2 into childminders for an extra day a week. Whereas the £243 used to cover us, added with DD7 breakfast club now it no longer does.

DH used to get vouchers through Edenred but his new employers are unable to do this so he has to go for Tax Free Childcare. I understand that if one parent goes for TFC then the other parent claiming CV would need to withdraw from the scheme and also sign up to TFC... Is this right?

If so.... How does it work? Is there a cap as to how much you can put in each month?

If we were to both put in £150 each month how much would we actually have to spend?!

I'm rubbish at things like this and want to make the best choice for us financially!

TIA 😊

Childcare vouchers won't be available at the new workplace and you can't claim both, so you may as well go tax free. That's what I did when I got a new job. It's fine. Just put in any amount you want, the government tops it up 20%. Eg put in £80, it becomes £100. Then pay your childcare provider through that.

If you each put in £150 that's £300, add 20%, you will have £360 to spend.

Following as I’m changing jobs so unfortunately need to come out of the voucher scheme too

£300 from you means government will add an extra £75 = £375

Is there a cap to what you can put in each month?

£2000 every quarter.

That's per child

This is all per child so if you have more than one then these numbers are each. They need their own accounts each which you can link to each other.

There's a maximum of £500 of discount every 3 months, so that £2500 in from you and £500 from them= £1000 per month. This goes by dates, so if you pay at the end of the month it may chop your allowance if you're delayed

DD’s nursery bill is about £700 per month. I pay £600 into my TFC account. It’s topped up straight away by £120 (20%) to make £720. I then pay the nursery £700 from my TFC account and leave any remainder in there.

Something to consider is that Tax Free Childcare is until first Sunday in September after the Child's 11th Birthday. Childcare vouchers can be used until the Child's 15th Birthday. There are different age limits if the child is disabled.

Tax Free Childcare - There is a Cap.
You can pay in up to £2000 per quarter year, per child. The max top up per 3 month period is £500. The 3 month period starts from the date you apply (I think) or maybe the date your account is approved.

Childcare vouchers and Tax Free Childcare
You cannot have both. You will then need to tell your employer in writing (for example, by letter or email), to stop giving childcare vouchers, within 90 days of applying for Tax-Free Childcare.

Which is better?
Claiming £243 per month of vouchers, under a salary sacrifice scheme, may be saving you around £933 per year if a basic rate tax payer, £625 if a higher rate tax payer.

If you pay in £300 per month to TFC, you would get a topup of £75 each time, so over a year you would pay in £3600 and would get a topup of £900. This is more than the saving you may be getting if a higher rate tax payer with childcare vouchers but less than you save if a lower rate tax payer.
The GovUK Childcare Calculator might calculate which scheme is better for your given circumstances: www.gov.uk/childcare-calculator

But OP says the new employer doesn't do vouchers so comparing isn't really going to be any use?

If you have 2 accounts for 2 children, can you pay for the one out of the other? Or can you only pay for the childcare of the named child? Don’t know if I’ve explained that well?

If I’m changing jobs and my new employer does the vouchers can I stay in the scheme and transfer across to the new employer? Or do I need to come out and start TFC?

@Eminybob

If you have 2 accounts for 2 children, can you pay for the one out of the other? Or can you only pay for the childcare of the named child? Don’t know if I’ve explained that well?

You can only use it for the named child.

OP is still claiming childcare vouchers, so can compare against continuing with that or switching to Tax Free Childcare.

OP's husband is no longer able to get childcare vouchers, so a comparison against when both parents got vouchers is not suitable. So the comparison now is between OP getting vouchers or switching to TFC.

@Eminybob

If I’m changing jobs and my new employer does the vouchers can I stay in the scheme and transfer across to the new employer? Or do I need to come out and start TFC?

When you leave your current employer you lose access to Childcare Vouchers as it is an employer provided scheme.

You will need to change to Tax Free Childcare.

@nannynick

Thanks so much for this. As previously mentioned DH employers do not run voucher scheme so we would have to both join TFC. I just wanted to work out roughly how much we would be getting a month, compared to what we are getting at the moment (only me).

So for arguments sake... I've just been on a salary calculator and without my full amount (£243 CV each month coming out) I should come home with around £1250 for part time. If I put £200 straight in and DH put in £80, we would have £360 a month..... Am I right?! 🤦‍♀️

20% of 280 is 56.
280 + 56 = 336.

To be exact, and to get £360 to use for childcare, you'd need to pay in £288 between you and the govt would top up with £72

Start with the total amount you need and then work out 80% of that which will get you to your contribution

@Notdoingthis

Thanks DH gave me the wrong sum and made me look like a dick!! 😂😂

@Notdoingthis

20% of 280 is 56. 280 + 56 = 336.

You don't take 20% of the amount you are contributing, it's of the total required

So if OP needs to pay £360 then
80% =£288 (OP and her DH contribute)
20% = £72 (govt top up)

It's not 20% of your contribution

Some of the responses here aren't correct. It isn't a case of you put in X amount and the government to up 20%. The 20% is what the government pay off the total child care cost so in effect they to up 25%. Say you needed to pay £100, you would put in £80 and the government would put in £20.
So if between you, you put in £280, the government would added £70 making £350.

Some of the responses here aren't correct. It isn't a case of you put in X amount and the government top up 20%. The 20% is what the government pay of the total child care cost so in effect they top up 25%. Say you needed to pay £100, you would put in £80 and the government would put in £20.
So if between you, you put in £280, the government would add £70 making £350.

@RightSaidPleb

Got it!! Thankyou!! 😁