New Toolkit for Childcare Vouchers

Childcare Vouchers are popular with those who work with large employers. They provide a tax & National Insurance free way to provide up £2860 per child to each employee. However largely because of the administration and hassle they are less common with smaller owner managed businesses. If you have children, run a business and pay for childcare (not schooling) please read on…

Under these arrangements an employer can establish a Childcare Voucher scheme which allows you to take up to £55.00 per week or £243.00 per month in the form of a Tax & National Insurance free voucher from their employer. This voucher can then be presented to a childcare provider who may apply to the employer for the voucher to be redeemed for cash.

The potential maximum saving for a higher rate taxpayer is £1,195 per year. For an individual who is liable at the basic rate of tax the maximum saving would be £904 per year. There is an additional saving for the employer of up to £373 being the employer’s national insurance that would otherwise be payable if cash were offered instead.

The main conditions of the scheme are as follows:

  • The child for whom the voucher is provided must be under 16 and be a child of yours who lives with you and for whom you have parental responsibility.
  • The childcare provider has to be registered/ approved with the appropriate authorities. Informal arrangements with relatives are therefore usually excluded unless they can arrange to register. Nannies or au pairs are usually allowed provided they are able to register.

The easiest way to check the provider is approved is to ask them. Alternatively you can telephone 0845 601 4771 or check at this website

Please be aware that if you are entitled to children's tax credits you are required to notify HM Revenue and Customs that your childcare costs have reduced. This may reduce your entitlement to tax credits.

We have developed a toolkit of documents that enable you to implement the scheme for a fixed sum rather than the % of the voucher usually charged. One flat sum means you only pay once rather than a % each time.

If you have any questions or want to consider implementing a scheme please do get in touch.

GeneralKaty Carlisle