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Childcare and Tax Implications

4 replies

wanda · 24/02/2005 21:08

Ok So I am being really lazy and can't be Ar--ed to look on the Inland revenue Website. Anyone up to date with this topic? A few of my friends are talking about a scheme where you can get tax exemption on the fees you pay for childcare. Apparently you can get up to £50 a week of your fees tax exempt. Anyone know if this applies to everyone or only if your employer signs up to it? I work for a Non Departmental Government Body (sort of Civil Servant but not quite). I'm currently on Mat leave and about to face the horror of full time childcare costs again! Any info would be welcome.

OP posts:
megandsoph · 07/03/2005 13:50

wanda depending on how much ur bringing in u can claim childcare tax credits which can pay up to 70% of childcare costs....
Hope this helps

cacaboo · 07/03/2005 14:33

Have you seen
www.childcarevouchers.co.uk

I think there are other similar schemes (I have a vauge recollection of one called "busy bees") but I don't really know much about it.

LunarSea · 08/03/2005 10:24

wanda - I get the vouchers that cacaboo mentioned. And yes it is only if your employer signs up to it (in government parlance it's "employer supported childcare". But as they actually save employers NI on the amount too, it's a saving to them, so worth lobbying for it - if you're public sector they'll likely be amenable to it. There's some info for employers on the Daycare Trust website if I remember rightly. See \link{Talk?topicid=6&threadid=41524#957914\here.

The exact savings will depend upon your tax/NI status. For higher rate taxpayers who aren't contracted out of SERPS - assuming you have the maximum £218 in vouchers - it could be up to 41% of £218/month (i.e. £89.38). If you're in the normal tax+NI band it would be 33% (i.e. £71.94). Lower tax band and/or earning less than the NI limit per month, or in the gap area between the NI ceiling and the 40% band, and the savings are less obviously.

However these are per parent, not per child, so get your partner to lobby for them too, and you can double up on the savings.

One thing you might need to check is how getting vouchers might affect your entitlement to tax credits. Childcare vouchers supplied by your employer are NOT considered as income for the purposes of calculating tax credits, but neither is a voucher spent considered to be expenditure on childcare.

So if you would normally qualify for the childcare element of child tax credit, then you'd need to do some calculations to see the effect that having the vouchers would have - try plugging the with and without figures into the online calculator on the IR site and see what it comes out with.

If you qualify for CTC, but your joint income is high enough for you not to get not the childcare element, then the vouchers could be doubly worth it, since as well as the tax saving they reduce the income CTC is calculated on, so possibly increasing your CTC (although the band to get only the minimum is quite wide so this won't work for everyone).

LunarSea · 08/03/2005 10:25

Ooops - that link should have been this .

And the IR tax credits calculator is here .

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