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Oct 20, 2020

How it works

You get benefits from a Childcare Voucher Scheme by making a "salary sacrifice".

This isn't as complicated or scary as it sounds.

Normally, when you get paid in cash, you have to pay income tax or national insurance contributions. But if you agree to exchange some of your pay for childcare vouchers, you get the full value of the "sacrificed" amount with no deductions - a saving of about one-third for a standard rate tax payer.

Salary Sacrifice Explained

If your employer wants to provide you with childcare vouchers you can pay for them as part of your wages. You sacrifice part of your wages in return for the same value in vouchers. Your employer will update your employment contract to include a signed agreement, confirming you have accepted the salary sacrifice.

Your employer pays no national insurance (NI) contributions on the amount agreed giving them savings of up to £373 for each employee. You will pay no NI or income tax on the agreed amount, meaning you can save up to £1,195.

More information about salary sacrifice can be found  HERE.

Are you eligible?

Childcare Vouchers benefit all eligible working parents who are paying for registered childcare for children aged between 0 - 16 years. Childcare vouchers can only be requested by the parent or legal guardian of the child. However, there are a few situations where Childcare vouchers may not be the best option for you. Click HERE to open HMRC page "Helping you choose". 

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