Childcare Frequently Asked Questions
- Why is my Employer offering Childcare Vouchers?
In 2005 the Government introduced legislation entitled "Employer Supported Childcare". This legislation recognised that employees with children under 16 may have childcare costs and they wanted to make the payment of these as tax efficient as possible.
By using a recognised Childcare Voucher Provider you can exchange part of your salary in return for a childcare voucher, which is free of tax and your marginal rate of National Insurance. Your employer will also save National Insurance on the amount of salary that you exchange.
- What aged children can Childcare Vouchers be provided for?
- Childcare Vouchers can be used to pay for the childcare costs (not school fees) of children that you have parental responsibility for, up to the age of 15 (until 1st September following their 15th birthday) or the age of 16 if they are disabled (until 1st September following their 16th birthday).
- Who can I pay with Childcare Vouchers?
Childcare Vouchers can be used as full or part payment for any of the following forms of childcare:- Day Nursery, Nursery School, Childminder, Crèche, Pre-School, Nanny, Au Pair, Out of School Club, Holiday Play Scheme.
To benefit from the Tax and National Insurance exemption your chosen childcare provider must hold either a current registration certificate with a URN reference number, or an approval certificate with an expiry date and reference number.
The approval organisations include the following: OFSTED (England), Nestor Primecare Services (England), Local Health and Social Services Trusts (Northern Ireland), The Care Commission (Scotland), The Care Standards Inspectorate (Wales)
- What is the maximum amount I can receive as Childcare Vouchers?
- Effective from 6/4/11 :
- £2,916 pa, £243 pm or £55 pw for 20% marginal rate tax payers
- £1,484 pa, £124 pm or £28 pw for 40% marginal rate tax payers
- £1,166 pa, £97 pm or £22 pw for 50% marginal rate tax payers
- How much can I save by receiving Childcare Vouchers instead of salary?
- Assuming that you decide to take the maximum level of vouchers:
- 20% marginal rate tax payers £933.12 per annum
- 40% marginal rate tax payers £623.28 per annum
- 50% marginal rate tax payers £606.32 per annum
- How do I join my Employer's Childcare Voucher scheme?
In order to join the scheme, please use your employer's link to our website www.childcare.nwbrown.co.uk. Register your personal details, including those of your childcare provider or providers and the monthly amount you wish to receive.
You will be required to enter into a 12 month salary exchange agreement to vary your Terms and Conditions of Employment. Should you wish to change the amount you receive in Childcare Vouchers, you may do so once a year at the beginning of the next 12 month period or early if it is a 'Life Change Event'. You may either choose to withdraw from the Childcare Voucher Scheme or make changes to your salary exchange agreement. You will need to give one month's written notice to NW Brown & Company Ltd to change or cancel the agreement explaining the circumstances giving rise to a 'Life Change Event'.
A 'Life Change Event' is defined as one of the following:
- leaving to go on maternity leave, parental leave, paternity leave or adoption leave;
- returning from maternity leave, parental leave, paternity leave or adoption leave;
- termination of your or your partner's employment;
- change of your or your partner's employment or hours of work;
- relocation - home or office;
- death of a family member or dependant, which affects your use of the Childcare Scheme;
- marriage, divorce or legal separation;
- significant change in childcare arrangements/circumstances, e.g., child starts school;
- long term sickness, or starting receipt of long-term disability benefit;
- returning from long-term disability;
- long-term sickness of a child;
- returning to work after maternity leave.
- I have school-age children so only pay for childcare during the school holidays.
- Calculate the total annual amount you spend on childcare and divide by 12. This will be the amount you will need to exchange each month and in return you will receive a childcare voucher. The monies will accumulate in your childcare voucher account for you to pay your childcare provider as and when required.
- Can Childcare Vouchers be ordered for more than one child?
- You can pay for as many children and carers as you wish but the amount of vouchers which can be taken tax and NI exempt per week is capped based upon your marginal rate of tax.
- Can I use vouchers for more than one childcare provider?
- You can register any number of childcare providers. You can either request a recurring regular monthly payment to one childcare provider or each month you can select the amount and the childcare provider that you wish to pay.
- How will I receive the vouchers?
- Once you have joined your employer scheme you will have online access to your childcare voucher account. When we have received a payment from your employer you will receive a confirmation email. On your pay date, using your logon details you can view your account and authorise payment to your nominated childcare provider. Allowing for the working week, a BACS payment will be made to nominated childcare provider within 24 hours.
- When can I use the Childcare Vouchers I receive?
- Most people use the Childcare Vouchers received in one pay period to pay for child care in the next pay period. For example, if the first deduction from your salary was in May, the Childcare Vouchers issued should be used to pay for your June childcare.
- If I don't use the vouchers immediately, what happens?
- Any monies received for Childcare Vouchers will be held in your childcare voucher account awaiting your use. However if your child reaches the maximum age you will have to cease membership and any unused voucher amounts will have to be refunded to your employer. Your employer will repay this to you via payroll, which will be subject to tax and National Insurance at the rates applicable at that time.
- What does my Childcare Provider have to do to be paid with vouchers?
- When registering to receive Childcare Vouchers you will be required to supply details of your childcare provider and their bank details. Once payment has been received by your employer then on your pay date, you can request a payment be made to your Childcare Provider. You can either select a regular recurring payment or go online to your account and select the provider and the amount that you wish to pay. Allowing for the working week, NW Brown & Company Limited will arrange payment direct to your childcare provider within 24 hours.
- Can I change childcare arrangements whilst in the scheme?
- Via your online account you can register any number of childcare providers. Once a monthly Childcare Voucher is received you can select the amount and provider that you wish to pay.
- What happens if I go on maternity leave to have another baby?
- Please discuss this with your employer, as they must provide all contractual non-cash benefits during statutory maternity leave. This applies even if the benefit is normally provided under a salary sacrifice agreement. Statutory payments must be paid in full and cannot be paid in kind. This is a requirement of employement law under the Equal Treatment Directive and is not a tax related issue.
- What happens if I expect to have some paternity leave?
- The rights to paternity leave and Statutory Paternity Pay (SPP) allow an eligible employee to take paid leave to care for his baby or to support the mother following the birth. If you expect to have a period of paternity leave or Statutory Paternity Pay (SPP) you should think very carefully as to whether you should take Childcare Vouchers during this period.
- What happens if I go on long term sick leave, or take unpaid leave?
- Providing you continue to receive a salary paid by your employer you can continue to exchange part of this income to receive Childcare Vouchers. However if there is no salary or only state benefits you can no longer continue to receive Childcare Vouchers. You can restart as an when your salary recommences or increases.
- What happens if I am entitled or may be entitled to Working Tax Credit (WTC) or Child Tax Credit (CTC)?
- If you enter into a "salary exchange" arrangement, then it is the reduced cash salary or wage that is paid to you. This is the amount that will be used when calculating your entitlement to WTC or CTC. The value of the Childcare Vouchers you receive are ignored for the purposes of the calculation. Please check the following websites for more information www.hmrc.gov.uk/calcs/ccin.htm, www.hmrc.gov.uk/taxcredits or contact HMRC on 0845 300 3900 or the Department of Work & Pensions.
- How will my credit status be affected by joining the scheme e.g. when applying for a mortgage?
- Your total remuneration package remains the same so you should not be penalised for deciding to take part of your salary as Childcare Vouchers. You may need to provide information on your total remuneration package (including vouchers) to a lending company and they should make their decision on that basis.
- How will Childcare Vouchers affect my state benefits?
- A number of state benefits are dependent on maintaining a minimum level of National Insurance contribution (e.g. Statutory Sick Pay and Job Seekers Allowance). Therefore by swapping part of your salary and accepting childcare vouchers, you could reduce your state benefits.
- How will Childcare Vouchers affect pay rises and other employee benefits?
- Generally employers provide any pay rises, bonuses etc and employee benefits on your "pre salary exchange" earnings, i.e. what your salary would be if you did not receive Childcare Vouchers. However as this is different between each employer please contact your HR Dept for their clarification.
- How do I stop receiving Childcare Vouchers?
- Please inform both your HR Dept and NW Brown & Company Limited in writing a minimum of one month prior to the date you wish your Childcare Vouchers to stop. Your Childcare Vouchers will be stopped and your original salary will be paid.
