Can I ask my boss to do this or is it not allowed? Childcare cost before tax?

[shouldibecrossaboutthis]

I work in a nursery, my childcare bill is normally about £800 a month. If my employer took this out of my wages before I paid tax an NI I would reduce my tax bill by nearly 50%.

Are they allowed to do this though does anyone know?

They could set up a Salary Sacrifice scheme. HMRC has guidance on the steps they must take for it to be a legally valid scheme.

It's a maximum of £243 per month tax free under the childcare voucher scheme, anything more would be a taxable benefit.

I imagine they accept childcare vouchers from parents who send their children to the nursery, so if they don't offer the scheme to staff on their payroll you should ask them to do so.

There is a limit though as has been mentioned, you certainly can't get £800 of childcare tax-free.

This HMRC leaflet, "Paying for childcare - Getting help from your employer" says:

"Workplace nurseries
Some employers set up their own nurseries at the workplace or at another location and offer places to employees? children. If your child has a place at a workplace nursery, you will not have to pay any Income Tax or NICs on this benefit."

Does that mean that the OP could agree for a lower salary but have a contractual benefit of a full-time place at the 'work nursery' (which is actually the business) without it becoming a Salary Sacrifice Scheme, Flowery?

I'm not sure if I've explained my thinking very well

Yes lougle, it was that link that made me wonder it, but I had also read about the £243/£124 cap so now I'm not sure!?

The Workplace nursery seems to be a separate section. It doesn't refer to the cap there...

Expenses and Benefits, what's exempt:

"Workplace nurseries

If you provide places for employees? children in a workplace nursery, you don?t have to report or pay anything. To be exempt, a workplace nursery must:

have the appropriate registrations and approvals
be available to all your employees
provide childcare for your employees? children, or children they have parental responsibility for
provide childcare up to the end of the week of 1 September following each child?s 15th birthday, or 16th birthday for children with a disability

The facility doesn?t have to be at your workplace. It can be in other premises that you manage and finance, as long as they?re not a private residence.

Working in a nursery isn't the same as a workplace nursery, though...?

Well at first glance, TheDoctrineofAllan...but if the workplace is a nursery, and has places for employees' children then it also becomes a workplace nursery, surely?

Otherwise, what is the distinction? There is no mention in the regulations of exclusivity with regards to which children go there, only that the nursery has to be available to all employees...

The distinction probably is if the employer has a workplace nursery and provides access to it as a benefit, that isn't taxable.

Sounds like the OP pays for childcare though, and just wants to use pre tax earnings to pay her bill. It's not a benefit, she just wants to sacrifice £800 of salary instead of £243.

Yes..I see that. I doubt also if a Nursery worker's wage would be high enough to support a £9600 drop in salary and remain within the NMW rules. Interesting thought though.

Yes it is isn't it? :)

My boss will pretty much let me do anything, she's finding out from her own accountant if it's possible but I thought I would ask in here to get an idea myself.

So say she pays me £9,600ish less a year (I'd still earn over NMW and above minimum wage), but doesn't charge me for childcare. Then that would be ok? But she would have to offer this option to all employees?

I do get working tax credit and child tax credit as I am a single parent with 2 children, one is school aged. I'm assuming the portion of that which goes towards to cost of childcare would be removed, but I'd still be eligible for the other portion?

I guess I'd have to worry about long term implications, like if I were to get a pay rise would it be from my original salary which I'm on now, or from my 'if we do this plan my salary will be less' salary IYKWIM?

If your boss were to try and set up a workplace nursery, it must be as a benefit to all staff, not one specifically. It wouldn't be a salary sacrifice, I don't think..but I'm not sure.

You are right that you'd lose the portion that went to the nursery prior to this change, because you wouldn't be paying that cost, it would be free.

You are right to think of the implications in every sense - you would be on a permanently lowered salary, which means that you would have no automatic right to a £9600 (say) payrise if you no longer needed childcare from your employer.

Lots to think about and advice needed from HMRC, too.

A big consideration if you are negotiating a lower salary would be mortgage application. Another is what would happen if you no longer needed the childcare would your employer put your salary back up.