Childcare vouchers: Why bother?

Childcare costs have spiralled and many parents are taking up the benefit of childcare vouchers to make ends meet. Workingmums.co.uk talked to MyFamilyCare’s managing director, Jacquie Mills to find out all about the scheme.

Childcare costs have spiralled and many parents are taking up the benefit of childcare vouchers to make ends meet. Workingmums.co.uk talked to MyFamilyCare’s managing director, Jacquie Mills to find out all about the scheme.
 
The scheme started in 2005 and it is now estimated that some 330,000 parents make use of childcare vouchers. The basics of the scheme is that parents that sign up, do not pay income tax or National Insurance on the value of the vouchers, which they would pay if they received the same amount in salary.
 
Big savings:
Vouchers can provide parents who are basic rate tax-payers with a saving of up to £904 per year (subject to individual circumstances), the equivalent of a 31% saving on the first £243 that they spend on childcare costs each month. For one parent taking vouchers at the higher rate of tax, 40% you can save £99.62 per month. Both parents can claim vouchers from their employer.
 
So how important is it as a benefit for working parents?
 
Jacquie says: “Childcare is increasingly expensive. In London, for example you could be paying out as much as £900 per calendar month if not more. If you take up your option to pay a portion of that fee with childcare vouchers you’re saving on the tax and national insurance. The scheme runs until your child is 15 years old.”
 
Am I eligible for childcare vouchers?
Both parents or guardians, as long as they are not self-employed can claim childcare vouchers through their employers.  It makes no difference whether you work full-time or part-time. You can start claiming vouchers the moment your first child is born until the 1st September after your child’s 15th birthday (or 16th if your child has a disability).
 
Jacquie says that there are special circumstances to heed if you are receiving statutory maternity pay: “If you want to get your full SMP entitlement then you need to come out of the scheme at 17 weeks otherwise the first six weeks of SMP that you get that is based on 90% of your salary would be based on the salary excluding that sacrificed for childcare vouchers.” It’s also worth noting that if you receive Working Tax Credit or are earning on or just above the minimum wage, you should contact your local Tax Office for advice, as childcare vouchers may not be your best option.
 
Similarly Statutory Sick Pay and other benefits such as pension, or death in service may be affected if you take up the voucher scheme so you should check with your employer or voucher provider.
 
Is it just for early years care?
Jacquie says that childcare vouchers aren’t just for early years care, although a lot of members of the scheme do use them for this reason. “You can use them for any Ofsted registered childcare including school breakfast clubs, after school clubs, holiday camps or any activity-based activity including sport or drama.”
 
You can also save them up and pay for them during bouts of childcare, so for example, if you need childcare just for the summer holidays then you can pay into the scheme during the year and then use them to pay for care. Care can also include au pairs, nannies, childminders etc, but you must check that they are registered and that they are happy to receive childcare vouchers.
 
How does the scheme work?
The scheme usually works via a salary sacrifice option. You agree to sacrifice a portion of your salary to go towards buying childcare vouchers, which in turn makes your childcare costs cheaper. You will need to sign a contract with your employer agreeing to this. Schemes vary from provider to provider but you will typically sacrifice your salary monthly as you get paid.  You will then receive the voucher by email or into an account if that is your choice and, you can then control how and when you pay your child’s care provider.
 
How can you choose between the providers?
If you Google, ‘childcare vouchers’ you’d be forgiven for being put off as a number of providers have flooded the market. This may make it even more complicated, particularly if your employer hasn’t already set up your childcare voucher scheme and you want to make a business case to them for doing so, in which case having researched the providers will be a good idea. Jacquie says: “All providers adhere to the legislation so what you need to pick between is how flexible they are. At MyFamilyCare we’re very focused on customer service, for example. You want to make sure your provider pays you on time and look out for any added benefits. We offer discounted opportunities to our members at department stores, on iTunes and for days out. Some providers advertise this but they then charge an additional fee to you for the benefit.”
 
How can you ‘sell’ the scheme to your employer?
Both parents can claim childcare vouchers so if your organisation isn’t already offering this benefit then why not approach them and suggest that they do so. You should point out that the benefit would not be a cost to your employer. In fact your employer would make a saving in employers tax and national insurance payment. For each employee that chooses to take the maximum monthly childcare voucher allowance of £243, the employer will save £373 per annum.
 
Jacquie also points out that having childcare vouchers might actually make the difference between a working parent returning after maternity or paternity leave and them sacrificing their job to stay at home.  Although it is important to note that the employer will incur an admin fee for setting up the scheme.
 
The rules are set to change in April 2011 when new entrants, regardless of their salary, will receive the same income tax relief as a basic rate tax-payer does currently so now is the ideal time to sign up.





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