Childcare Vouchers

[PutAnotherShrimpOnTheBarbie]

Hi, I am just in the middle of becoming OFSTED registered, and once I am the family I nanny for said they would split the benefits of them using childcare vouchers with me.

I was wondering how you work out how much each parent gets, or does it depend on their wage?

Thank you

I'm not sure I understand the question......

Each parent is allowed to salary sacrifice up to £243 of their wage. One or both parent may have a scheme set up, depending on their employers. They then authorise payment in the amount of your wage into your bank account, usually a top up would be needed from their own bank account.

Not sure I understand them 'splitting the benefit' of using the vouchers with you either......

It will not affect you at all. It's up to them to work out how they split it. You will still get the same amount of money.

Perhaps they meant ehy would pay for your registration?

Theyve said that because theyre saving money with the vouchers and I am getting registered they would increase my wage when it is all set up, so if they get £200 worth of vouchers per month, I would recieve an extra £100 wages per month. If that now makes sense? So we are both benefiting from me getting registered.

If they get £200 of vouchers per month, that is not their benefit. Their benefit is the tax that they WOULD have paid on £200, so that all depends on their income levels, but the amount of tax has been limited.

And, what about the cost of registration every year? Surely that will need to be deducted from the tax savings before they work out your share of the "benefit". Of, and they should consider the loss to their pension contribution as well.

That means the monetary tax relief per person is £11 per week, maximum. So £22 per week per couple. The actual size of the voucher depends on their income, if on 20% tax then the voucher would be a higher value than if they were on 40% tax. The benefit to them, however, doesn't change one iota. If they both claimed the maximum relief their monthly 'benefit' is £95.33.

If you're splitting that benefit with them your extra income per month will only be half that..... sorry if you were expecting more.

There is so much misunderstanding about childcare vouchers, although given the ever-increasing complexities perhaps it is not surprising.

First of all, the amount they will save depends mainly on their salary, but also their pension arrangements. If they were not already in a voucher scheme before 5th April 2011, the maximum amount they could save (assuming they do not get any benefit from the saving in Employers NI) is £933 a year each. This assumes that they have taxable earnings above £7,475 a year and (NIable earnings) below £42,485 a year, are not in a contracted-out pension scheme, and their (and their employers') pension contributions are based on a notional salary that is not reduced by the amount of any salary sacrifice. If they pay higher or additional rate tax, the 5th April 2011 date becomes very important because their potential savings range between £600 and £1,500 each, depending on whether they were registered before or after that date (and whether 40% or 50% tax applies). There is even a band of earnings between £100,000 and roughly £115,000 where the savings could be even higher.

And if they pay you more there will be more Employers NI for them to pay so you are unlikely to see all the extra even in your gross pay.

As you can see there are a lot of variables, so you will need to ask them and trust their answer, or probably just wait and see!

What we did with our nanny was pay for the OFSTED reg as it was for our benefit not hers. This costs just over £100 but we then had to declare it on our tax returns as it wasn't necessary for the job. It meant we had to pay out another £65 tax. Maybe what your boss is trying to do is ask you to lay out for the OFSTED reg so they aren't liable for the tax, while ensuring they pay you back in your salary - does this make sense?

Yes pecanpie, they have also said they would contribute half of the payment for the annual registration.

I wasnt really sure how much to expect, I just didnt have a clue how these things worked as I am obviously new to OFSTED.

Thank you for all your answers, cant really say I'm any wiser though! I guess I'll just wait and see!

Just remember that the amount of the voucher is not their benefit. Their benfit is the tax that they haven't paid on that amount, so won't end up all that much, really.

Pecanpie I don't think you were well advised there unless there is somthing unusual about your situation.. Paying a nanny's ofsted fee and any related costs should not be considered a taxable benefit because you can make registration a requirement of the job, and in any case job-related training paid for by the empoyer is not a taxable benefit. The only thing that would be considered a benefit would be if you paid her insurance.

Even if it were a benefit. It should not have gone on your tax return and there shouldn't be £60 of tax for anybody to pay for a £100 benefit.