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Tax Credits - How Does It Work when used to pay for childcare?

14 replies

nannynick · 25/03/2007 19:20

I have been approached by a parent who wants to pay me as their nanny using Tax Credits.

I understand how Childcare Vouchers work, but not about Tax Credits. Can anyone provide me with a simple guide? Such as who gets the money - me or the family? What paperwork is needed (does the family need to prove how much they are paying me)? Any problems/issues/pitfalls to be aware of?

Usually know quite a bit about these things, but this one I'm rather patchy on. Many thanks.

OP posts:

BizzyDint · 25/03/2007 19:22

it goes into the parent's bank account same as any other tax credits. maybe they are confused and are actually meaning the vouchers.


saltire · 25/03/2007 19:25

As far as I know the money goes straight to the family. They need your registration number (in the case of CMs anyway). I think they may be asked to provide invoices/pay slips i always give them to my mindees parents.

The problems i have had
One woman came to see me about childcare and was apparently going to use the service. Then changed her mind. 6 months later i get a letter from the Tax credits people asking me to confirm I'm her CM.

One of my mindees parents hasn't paid me for two weeks because her money apparently hasn't gone in.
I also have to get paid on a Wednesday in arrears , and weekly because according to her the Tax Credits are paid in arrears and they don't pay monthly.
Also, beware if they are relying on Tax credits as the sole way of paying you as if they are overpaid it will be stopped completely


BizzyDint · 25/03/2007 19:29

you need this if you haven't seen it already hth


nannynick · 25/03/2007 19:38

Thanks for that so far... appreciate everyones input on this one... so please do add more comments.

They are not talking about Vouchers. The child is disabled (not sure if that makes a difference), but they are not using Direct Payments / DLA.

OP posts:

PinkChick · 25/03/2007 19:53

my mindees parents pay me using their childcare element of tax credits, as far as im aware an amount go's into their bank account along with other credits and they(the parent) pay you from that. HTH


PinkChick · 25/03/2007 19:54

thier tax credit/benefits will be more if the child is disabled, but child care element will be the same..unless you require specialist training to care for the child then they may account for that?


BizzyDint · 25/03/2007 20:04

that link basically says all your involvement is is to give the parents your reg. number and be prepared for the tax credit people possibly contacting you to verify the amounts the parents have said they pay you. other than that you don't do anything.

i would just make sure for yourself that the parents are aware that you will still need paying regardless of anything happening to their tax credits.


PinkChick · 25/03/2007 20:32

i get my payment/fees in advance and when they get their credits is up to them, i need paying beginning of week, if their credits dont arrive till end, i still have to be paid


cat64 · 25/03/2007 20:43

This reply has been deleted

Message withdrawn

Katymac · 25/03/2007 20:45

I wish every 6 months the TCO phone us or wrote to us with a form saying who was claiming and who wasn't, for us to fill in & send back

I know last year a family of three claimed under my reg no I couldn't do a damn thing


dmo · 26/03/2007 00:01

ive had that Katy it makes me


nightowl · 26/03/2007 00:22

the childcare element of tax credits (80% now) of the full fee is paid into the parents bank account. thats been the way for as long as ive used childcare. (approx. 6 years) i had to provide ofsted number and proof of childcare (ie weekly receipts from childminder/nursey). im not sure if the inland rev ever actually contacted the childminder/nursery.

they do make lots of mistakes though, it's really hard as a parent. you go back to work after working out your income based on this help and its true that sometimes the payments get stopped for no reason. very easy to lose your childcare because quite rightly no childcare provider is going to/or should put up with late/no payment.


nannynick · 26/03/2007 07:29

As I am a nanny (approved home childcare provider) the family have to register as an employer and process PAYE.

WTC5 appears to me to confirm this, regardless of the number of hours involved, as it says:
"If you employ someone as an approved home childcare provider, you can claim for up to 80% of the gross costs of employing that person as long as this is within the limits. You should include ? the costs of any employer?s National Insurance contributions you pay"

Care will average at 6 hours per month. This works out to be average of £12 per week. 80% (if able to get maximum claim) is £9.60

Looks like the family won't have to pay Employers NICs as the amount is so low, but as I have other employment the family does need to use Simplified PAYE.

Is this worth the hassle?

OP posts:

nannynick · 26/03/2007 20:29

The parent feels that them claiming tax credits is not really my business (though of course they did ask for my approval number).

However I feel that if they are not operating PAYE it is certainly my business as their employee. Sure I think its a pain to operate PAYE for what averages to be 6 hours childcare per month, but I can't change the law. Have worked out that they can use the Simplified PAYE scheme, as the payments are so low. Wish there was a better way of doing this sort of thing.

Have suggested they look for a Childminder, though I don't know of any near me who work at weekends.

OP posts:
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