Could anyone please explain the Tax Credits/Nursery Vouchers schemes?

[zmandaz]

I have made the decision to get a full time job so my daughter will go to nursery full time during the week. Up until now I've been working part time and I've been receiving money towards my childcare costs through the Working Tax Credits, however my new job offers Childcare vouchers. From what I understand, you buy the vouchers from your pay before you get taxed. I spoke to the Tax Credits Helpline twice and they said that if you use the vouchers, you may be able to get a percentage of the amount left to pay through the WTC or you can get up to 85% of the childcare paid for through WTC without using the vouchers at all but they can't guarantee what percentage you'd get paid, it would depend on your wage. So, I'm confused! Surely by using the vouchers I would be paying for the childcare whereas if I use the WTC I would only be paying the difference between the vouchers and the nursery fees. So why would the vouchers be an option? The tax credit people were totally useless and couldn't answer anything that wasn't on their script, all they said was it's up to me which scheme to choose. If there's anyone who can explain the schemes to me I'd be really grateful!

[Tinkerbel6]

If you are a lone parent then claiming childcare costs through wtc is your best bet, the child care voucher scheme works mostly for couples, or singles, who earn too much to claim wtc so get a little help through a salary sacrifice, you cant use vouchers and claim childcare cost from wtc, its one or the other

[zmandaz]

I thought it was strange. Why the TC people couldn't just tell me that I don't know, they make everything so complicated
Thanks very much

[keeptakingthetablets]

If you use the childcare vouchers, you're receiving tax relief at source, so if your costs are covered in full by the vouchers you'll have no entitlement to childcare costs through WTC. However, any costs over any above the value of the vouchers can be claimed via WTC - AND you can deduct the value of the vouchers from your declared income as it is a pre-tax deduction (you may need to push your TC advisor to check the guidance on that one, but it's a fact).

[PeppermintPatty]

It depends how much you earn. As Tink says if you are a single parent, or couple on very low income you will get childcare costs from WTC at 85%.
But most couples earn too much to qualify for 85%, you might get a lot less than this or nothing at all.
So most couples better off getting childcare vouchers (especially if both parents can claim for them).

[keeptakingthetablets]

I repeat - it really makes no difference - if you take the vouchers, make sure when you do your renewal for Tax Credits you deduct the value of the vouchers from your annual income. That way, you get the pre-tax value of your vouchers, but you don't miss out on the tax credits side of things because your income is lower.

[zmandaz]

I think it seems best to stick with the WTC. I'm hoping that I will be able to get as close to the 85% as possible, I just wish they could tell me straight how much it would be but they said I have to work out my earnings from April 08 year to April 09 and they'd work it out from that and tell me when I apply but I can't apply until the day I start work! I'm not stupid but I find this sort of thing really hard to understand and wish they'd make it easier. Thanks again for the advice, much appreciated.

[Tinkerbel6]

zmadaz if you know how much your child care costs will be then they can do a calculation for you, ring them back and speak to another advisor

[spicemonster]

Yes - contact them and they will work it out for you. As some people have said, if you get vouchers, you can still be eligible for tax credits. It is not true that if you get vouchers, you can't get CTC.

[mojoawol]

They are a nightmare to contact on the phone though, despite the freindly TV ads - tried to call them to renew my TC's and never got through, so had to send the form in instead.
I was never aware you can't claim for both, and so I am (claiming for both). I have no idea how the TC work (there are Working TC's and Family TCs - you may be eligible for both). But didn't know about knocking of the vouchers on my salary! Will have to try and squeeze some more out of them for that one!
We need all the help we can get!