Claim your childcare vouchers

6 May 2008

Only two in every 100 working parents have signed up for childcare vouchers, according to childcare voucher specialist, Childcare Choice - a benefit that could save up to £1,195 a year. Here is what you need to know about childcare vouchers.

What are childcare vouchers?

Childcare vouchers were introduced by the government in 2005 and are a cost effective way for parents to pay for childcare. The vouchers basically allow parents to pay for childcare from pre-tax income and cover childcare up to the age of 15. You can use them with any nursery, playgroup, nanny, childminder or au pair who is registered and regulated by Ofsted.

How do they work?

Childcare vouchers work by parents giving up some of their salary - up to a maximum of £55 a week or £243 a month - in exchange for the same value in vouchers. The sum you give up is exempt from income tax and National Insurance, which means you won't pay tax on up to £1,195 of your salary.

How much are they worth?

The scheme enables parents to save between £903 and £1,195 a year, depending on how much of your salary you sacrifice and whether you are a basic or higher rate tax payer. If both parents join the scheme, joint savings of nearly £2,400 can be made. Childcare vouchers also enable employers to save up to £370 per year for every employee on the scheme.

How can I claim childcare vouchers?

To get childcare vouchers, your employer must run a scheme so check with your human resources department to see if your company does. If your employer doesn’t, then it’s worth trying to persuade it to start. Firms can do voucher schemes two ways, either by operating it themselves or by using a voucher company to do all the administration for them.

Are there any downsides?

Getting childcare vouchers can impact your entitlement to tax credits although in most cases you will still be better off taking the vouchers. Also, if your child is looked after by a relative in the child’s home, you cannot use the vouchers to pay them.

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