About Childcare Voucher Schemes
How does it work?
Childcare Vouchers are provided as a 'salary swap' arrangement. This means that you swap up to a set amount of your salary in return for Childcare Vouchers. The amount of salary that you can swap depends on the amount that you earn and thereby the tax band that you fall in. The amount of salary you swap is free from tax and national insurance.
Typical tax and NI savings per annum are:
| Basic Rate Tax Payer (20% PAYE & 12% NI) | Higher Rate Tax Payer (40% PAYE & 2% NI) | Additional Rate Tax Payer (50% PAYE & 2% NI) | |
|---|---|---|---|
| Max monthly vouchers | £243 | £124 | £97 |
| Annual tax & NI saving | £933 | £623 | £606 |
The salary swap automatically terminates if you go on unpaid leave (i.e. maternity leave or unpaid sick leave) or take a sabbatical.
Any registered or approved childcare that you pay for children up to 15/16 years of age will qualify. For children under the age of 5 this will usually be paid childcare at a nursery. Activities such as after-school clubs and school holiday clubs can also be paid for with Childcare Vouchers. It can also apply to registered childminders and nannies, depending on their status. Unfortunately, the vouchers do not apply to school fees.
As your salary has been reduced to provide Childcare Vouchers there are possible implications:
- Paying less National Insurance can affect your state pension record and your entitlement to certain social security benefits.
- Wherever possible, the company will use your notional salary (i.e. salary + Childcare Vouchers) for calculating other employee benefits, e.g. life assurance and pension scheme
- There is a small, but correctable, effect on Statutory Maternity Pay
- When applying for mortgages or loans, the lender may only accept the reduced salary
- Recent changes to those claiming Working Tax Credit may mean that you could be worse off by swapping your salary for Childcare Vouchers.
How do I join?
If you are interested in the idea of Childcare Vouchers, you need to identify the amount of paid childcare that you will have in the year ahead and then swap the equivalent amount of salary.
You will need to talk to your HR department and ask if your company already has a Childcare Voucher scheme, or is willing to start one. They can register an interest through this website.
Once your employer has registered with NW Brown & Company Ltd, you should receive an email explaining that they are joining the scheme and including a link to a registration form. Follow the link and complete the online form. On receipt of your completed form, NW Brown will make some initial checks to see if it is likely that you and your childcare provider meet the Government's rules for tax-free Childcare Vouchers. If you decide to proceed, your HR department will amend your contract of employment via an exchange of letters/emails with you. You should make sure that this happens to avoid any future issues with HM Revenue & Customs.
You cannot claim Childcare Tax Credits Assistance for childcare costs met by your employer or with Childcare Vouchers.
To find out more information about how tax credits can help you with your childcare costs visit: http://www.hmrc.gov.uk/childcare, click on Tax Credits, then on Tax Credits Leaflets or Tax Credits Questions.
You can also visit HMRC's calculator, http://www.hmrc.gov.uk/calcs/ccin.htm to assess your own situation.
How will the whole process work?
A payment request is issued to your employer at the beginning of each month detailing the amount of salary that you wish to swap. You cannot change the amount you swap each month, but you can change the amount once per year, or in the case of a 'life event', which may include the birth of a new child, change in employment, change of childcare providers etc.
Upon receipt of your employer's payment, you will receive an email notification of your Childcare Vouchers. Please note that we cannot issue your Childcare Vouchers until we have received the relevant payment from your employer. You can log on to the NW Brown website at any time to view vouchers received, payments made and the balance of your account.
When you want to pay your childcare provider(s), simply login to your online account, select the provider you wish to pay and enter the amount. The payment should go to the provider on the next working day and they will receive an email notification from NW Brown.
