Can someone explain something to me about childcare vouchers?

[Em1503]

Hi, I'm due back to work soon after maternity leave and I'm trying to understand how childcare vouchers work and am getting confused!

So each parent can claim up to a maximum of £243 per month BUT how does that work when our total monthly childcare costs will be approx. £350?

If we both claimed £243 then that would total more than the cost of our childcare, surely that can't be right? Or is it that if I claimed the £243 then DH would claim the difference up to £350? Or something different altogether?

I've had a look on the gov website and googled it but I still can't figure it out!

Thanks!

You can claim however much you like, £244 is just the upper limit.

You can decide how to spilt it too. Though it's worth noting that (most anyway) don't expiry so you could get slightly more than you need in case you ever need additional childcare.

You don't have to spend it all every month. So you could claim £486 every month between you, spend £350 and save £136, but beware once the money is in your childcare voucher account it can only be spent on childcare, with people that take the vouchers.

This way you can build up a buffer to draw on later (another maternity leave?, reduced hours? Redundancy? Increased bills elsewhere?).

Or you can just put away what you need to pay each month between you.

Oh I see! Thank you that has cleared it up for me!

Above posters correct but I take it both your employers offer the scheme and you are both eligible, as I understand it you can't join now if you are a higher rate taxpayer.

Another thing to think about is if your employers offer it as a salary sacrifice scheme, and you are also paying into a pension, you pension contributions will be less, which irks me a bit about the scheme. So for example say I get paid £1,000 a month and pay 7% of my pay into company pension. With the childcare voucher scheme the £243 comes of at source, so I am only paying 7% of £757 into my pension, so less getting saved into my pension and also my employers have to pay less (as they also put in a contribution.) I worked it out for me and I in a year I am better off taking the childcare vouchers, but I do worry that over a longer time, say 5 years and over it might be better to just pay for childcare normally and keep more going into my pension.

I pay into vouchers and have accumulated quite a decent buffer since DC went to school, much more than I spend now he's no longer at nursery. But I still pay in the max, since as was said upthread, the cash doesn't go away and there's no time limit apart from your dc's 16th birthday.

Any unused voucher cash after that will be refunded to you, taxed at whatever your marginal rate is at that date.

You can cash them in at any time before that, too. Again you'll be taxed at the marginal rate. But you'll get the net amount back.

Higher rate tax payers can still join childcare voucher schemes but they can only claim tax relief at the basic rate. This is done by limiting the monthly maximum punt to £124.

You can claim the maximum from your pay and just the bit extra from DH's pay.
Or, you could both claim the maximum and save the extra for another baby like someone else said. I did this and carried on with it throughout my 2nd maternity leave. In fact, I have so much saved up in childcare vouchers that, for the past 2 years, I have used my accumulated vouchers to pay for my 2 children now they are both in school. I have just over £1000 left so that should last almost a year. My eldest starts secondary in September so it has worked well.

Oh, BTW my childcare dropped from £600 a month to £100 a month once both were in school. School hols I pay more though.

You can also use the scheme to pay for things once they are at school like Explore Learning (ie, tutoring), summer day camps (eg, Barracudas) and activity breaks with companies such as PGL (as long as it is not part of a school/brownie/cub type trip). DD is in Y5 and DH is still paying into the scheme to cover things like that.

I didn't know that about the reduced pension contributions lovingmatleave. I've been doing some calculations, and the current scheme leaves me approx £10 / month better off than the new scheme, but going part time and taking a hit to my pension contributions from that anyway might swing things the other way.