Childcare vouchers - anyone had exp?

[runtus]

Hello, quick question from an employers point of view regarding childcare vouchers. Are they a) helpful to a working parent or would you prefer a chas pay rise? a)do most nurseries accept them? c) Has it had any impact on benefits/family tax credits?

Any advice would be very welcome!

Hi runtus - check this on teh childcare vouchers website, but, I think from next year there is going to be big benefit as there will be a tax advantage (I think - and I may be wrong, that at the moment there is only a NI benefit) - asking whether you'd rather have a pay-rise is kind of an odd question, as vouchers are a salary substitute scheme - they don't cost anything to the employer, all you do as an employer is give people the option to have some of their salary paid in vouchers

I get paid in childcare vouchers and they are immensely helpful - my salary after deducting childcare costs was £3 a month - the vouchers mean it's over £100 which means I'm not working for 'nothing'....my nursery had heard all about them and was happy to accept them (although I'm still the only parent that uses them)..the scheme I use has actual paper vouchers which I hand over, the nursery send them off and get paid either direct into their account or by cheque..my collegue's childminder accepts them too and has had no problems.
It can have a negative impact on Family tax credit I believe (but I can't claim that so I can't be certain) - it also reduces your pensionable pay if you have a company pension, which means you might want to make it up later..Also if employee gets pregnant it's best if they opt out of the voucher scheme imediately as their maternity pay is calculated on salary minus vouchers.
Overall I think it's a great benefit to offer but individual employees might need to look hard at whether it suits their situation.

And as hatter said, the benefits will be even greater after April as there is a reduction in income tax as well as the NI.

Hey Runtus - we use them via Airbus - great scheme - believe it's also beneficial to the employer as well as the employee. Also have got a friend on to them - via Barclays. She too is extremely happy. We use a nursery, she uses a childminder.

Anything which saves a bit of cash when paying out huge amounts on child care is great!

My vouchers were in addition to salary not as a subsitution for. Would have found things difficult without them.

I'm in the voucher scheme at work. Confused by bluebear's post because I have kept mine up throughout my maternity leave (just got back to work this week). Although if my voucher allocation had gone over my pay they would have been stopped IYSWIM.

We used to have a paper scheme but now we are with Accor. I can elect to the nearest pound how much I get in vouchers and it goes into my Accor account. I then access my Accor account and transfer the amount of money I wish to pay into the nursery account. Next year when DS goes to school I will hopefully be able to transfer some of it to a childminder and some to nursery. That means I can hold money over because with DS being on nursery grant our monthly payments are variable.

employer "should" treat your total salary as newly reduced salary + childcare vouchers (ie exactly same amount as before) therefore your pensionable pay, maternity pay, mortage application, right to tax credits etc should NOT be affected - still v grey area though (even for IR & employers). as far as I know still saving only from NI (though was a gov consultation on income tax too) so most people on average should save around 10& of their childcare costs per month (depends on whether in employer pension scheme) -e.g so if you childcare costs £500 a month you'd save £50 etc

meant to add though re mat pay - if this falls below the lower earnings limit for national insurance then there would be a problem as obviously couldn't be any saving if you aren't receiving enough income to pay NI on. Probably why some employers say can't have vouchers on mat pay - nightmare to work out!

zola - tax saving comes in from next April, but the tax + NI savings are limited to £218/month per parent. It does mean though that those who were over the NI limit (and even in the 40% band) can benefit from them too from next year.

That's £218/month of vouchers of course, not a saving of £218/month (shame!).

at least it's a step in the right direction, typical of gov to limit it though

Lunarsea - what sort of difference would it make to savings, do you know (zolapola says it amounts to around 10% of childcare costs at present)

I use vouchers too - my pensionable salary remains the same, although my actual salary is reduced, so in theory I could claim extra tax credits I'd have thought.

My monthoy nursery fees change each mont too with Nursery Grant, but I have to pay the same amoount in vouchers to my voucher account, and the same amount each month is transferred to my nursery, who have agreed that as i will be paying the higher amount each month, i.e.without the grant taken off, they will pay me the grant at the end of each term - so just before Christmas whcih will help!!!!

Shame it's being reduced next April to £50 maximum voucher a week though.

One thing to bear in mind, with my voucher provider anyway, you can only change the amount you pay if you have a major change in family circumstances (Gov'nt definition), so only once ds goes to school say, not just because you don't fancy the scheme anymore.

Titchy - my company scheme used to be like that - you had to have a "lifestyle event" to change it during the tax year but now we are allowed to change it month by month - just increased mine to £700 for December when there is no grant but will reduce again for January. Bit unfortunate that the government is limiting it from April.

jamiesam - it's 11% at the moment (assuming your income is below the NI ceiling).

The savings from April next year will depend upon your tax/NI status. For higher rate taxpayers - assuming you have the maximum £218 in vouchers - it could be 40% of £218/month (i.e. £87.20) per parent. If you're in the normal tax+NI band it would be 33% (i.e. £71.94). Lower tax band and/or less than the NI limit per month, and the savings are less obviously.

For us with both our employers offering the scheme, but with only one child to pay for, and dh in the 40% tax band, our saving will go up by about £100 a month compared to now. Obviously that will vary if you have more than one child using childcare, or only one employer offering it, or only one of you working, etc.

For a basic rate tax payer just the £71.94 saving next year is the same as the saving now on £654 of vouchers, so I should think most people will be better, rather than worse, off, or round about the same.

One thing to remember is that for the purposes of child tax credit calculations, childcare vouchers are NOT considered as income, but neither is a voucher spent considered to be expenditure on childcare. So if you would qualify for the childcare element of child tax credit, then having the vouchers would reduce your entitlement (at a rate of 37p in the £1) so they probably aren't worth it. If you qualify for CTC, but not the childcare element, then they 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). As far as I've heard these rules aren't changing for next year, but you'd have to check with the IR to be 100% certain about that.