Act now on chilcare vouchers

Secure maximum tax savings from childcare vouchers - Act Now!

13 February 2011

We mentioned the tax and NI savings you can gain as directors and employees by using childcare vouchers in our Spring 2010 newsletter.

Here is a quick recap:

You can earn up to £55 per week tax and NI free by joining a childcare voucher scheme. This means employees can save between £962 and £1,195 per year. Employers can save up to £373 per employee per year.

So what’s new?

HM Revenue & Customs has published a technical note outlining the changes to employer-supported childcare proposed to take effect from 6 April 2011. It may be seen at http://www.hmrc.gov.uk/employers/employersupportedchildcare.pdf

The most important point to note is that the changes will affect only those who are not already participating in their employer’s childcare vouchers scheme at 5 April. There will be no change to the tax relief enjoyed by those already participating in a scheme.

New entrants to an employer’s vouchers scheme on and after 6 April 2011 will be subject to a reduced maximum of tax-free vouchers. This maximum is at present £243 per month.

• New participants whose estimated earnings and taxable benefits exceed the sum of the personal allowance and the basic rate limit (a total of £43,875 in 2010-11) will have a reduced maximum monthly amount in vouchers of £124 compared to £243 at present.
• For those whose estimated earnings and taxable benefits exceed the additional (50%) rate limit, the maximum monthly amount in vouchers will be £98.

So, if you intend to use childcare vouchers as a tax efficient means of paying for after school clubs or nursery care, you need to act now to secure your tax savings.

 We have partnered with Abacus Solutions to provide you with a scheme which will be tax compliant and is easy for you to use. Contact Anthony Rentoul on 0845 257 0046 or visit their website: www.abacusvouchers.co.uk. Remember to check whether childcare vouchers could affect your tax credit award first by using the HMRC calculator which can be found at http://www.hmrc.gov.uk/calcs/ccin.htm