Please talk to me about childcare vouchers.

[Sidge]

DH and I are thinking of applying for childcare vouchers through our employers as I go back to work next week and DD3 will be in nursery.

Can someone explain to me in Noddy terms how they work? Who should claim them? (DH is the higher earner.) Do they really save you much and is it much hassle?

Thanks muchly

You can both claim them - up to £243 a month via a salary sacrifice. The money gets transferred into a voucher account held by the voucher provider selected by your employer(s) - Busy Bees, Accor etc.

Your childcare provider has to register with the voucher provider (this isn't usually a problem for nurseries and childminders. bit more complex for nannies).

You save tax and NI - so definitely worth doing, and not much hassle once you've set it up.

Nothing to add other that it really does save you money. DH and I both do it and it saves us £170 per month (he is a higher tax payer and I am part timne and in the lower tax band). If you are both lower tax bracket you would save circa £140 and if both higher band circa £200 per month)

...oh and of course your gross salary/pension contributions and NI are all reduced accordingly)

Thank you both, that's really helpful.

So does the nursery access the money via the voucher provider themselves then bill you for the difference?

We use ours like another bank account - but one that can only make payments out to our childminder. So we can either set up a standing order, or do ad-hoc payments - but of course you have to have enough vouchers to cover the costs - or make a top-up payment separately from your normal bank account.

Your employer doesn't have to register with a voucher provider: they can do it by paying the nursery direct - i.e the nursery invoices your co for the amount of childcare allowed tax-free. This is popular with small organisations because they save the cost of the vouchers (which, for the employer, wipe out the financial benefits of not having to pay their contributions on your tax-free amount.

The only thing to beware of is if you are planning maternity leave or a pension soon benefits are based on your salary net of the nursery voucher amount - it is a salary sacrifice and your salary is considerd to be the amount with the nursery voucher / payment deducted.

my cm accesses the money by phoning up and giving the voucher number..thats Busy Bees thoguh not sure about other schemes..It saves us £200 a month, 'tis very good

Definately both claim them - we do that and the combined saving is basically what makes it financially worth me going to work!!

I've just found the bumph online for DHs employer (Navy) - they use Sodhexo for their scheme so apparently he just applies to them. No maternity leave planned (no more babies!) and apparently the MOD have agreed final pension based on gross salary not salary sacrifice amounts so that's a bonus!

Will speak to my new employers as well (PCT) and try and get it sorted.

Thanks everyone.

Dh's employer uses Sodexho and it seemed very easy for him to set up and use. mine was Leapfrog now Busybees - they seem a little chaotic but we've got it sorted now.

Just check the savings carefully.

In some circumstances you can save little or nothing.

If your childare costs e.g. £500 per month and you pay for it with vouchers you cannot tell the tax credits office that you are paying for childcare so you may loose some tax credits. Not only that but when your P60 comes out the £500 per month vouchers you have received are included in your annual pay so you tell teh tax credits office that you have bought home £6K cash more than you actually have IYSWIM.

It does save money for many people, but for me if I take the vouchers I loose quite a lot in tax credits as I am borderline for getting childcare element...then if I get no childcare element I don't get my water bill capped, which costs me again...

I suggest you go onto the Tax credit modeller site and see how the changes in income and childcare costs affect your claim for Tax credits and see whether it is better for you to pay cash for your childcare and claim Tax credits or whether it is better to take childcare vouchers and get no tax credits for the childcare element.

Oh and as others have said split the vouchers between both of you - as you only save tax on a certain amount...about £50-60 per week per person.

I think your DH will save more if he is in the higher earnings limit so let him take the higher value if that is appropriate.