Do you pay for childcare?
Do you own your own Limited Company?
Would you like the taxman to pay up to £2,624 a year for you?

Employer-Supported Childcare Scheme

This information applies to small businesses where the Parent(s) work within their own company and pay for childcare.

The business must be a limited company and the owners are Directors/employees of the company.

There are two types of scheme – a salary sacrifice scheme and an addition to salary scheme.

Salary Sacrifice Scheme

In a Salary Sacrifice Scheme, employees agree to reduce their existing salary in exchange for receiving childcare vouchers. The employer and employee enter into a Salary Sacrifice Agreement and the employer then amends the payroll to reflect the change in salary.

Addition to Salary Scheme

In an Addition to Salary Scheme, employees receive childcare vouchers on top of their salary. The vouchers can still be provided Tax and NI free. Providing the vouchers are kept within the prescribed limits (£55 a week or £243 per month), they do not have to be declared on P11D's.

Some smaller companies do run the scheme on an additional benefit basis which enables you to receive further income from the company in the form of Childcare Vouchers tax and NI free (up to a maximum of £243 per month) and also the value of the vouchers and administration are a cost to the company and, therefore, set against the Company’s Corporation Tax liability.

About Childcare Vouchers

Since April 2006, businesses have been able to offer employees up to £55 a week (or £243 a month) in childcare vouchers and can be provided Tax and NI FREE.

This is an efficient way of distributing company profits. If running the scheme on a salary sacrifice basis each employee can save up to £933 a year for basic rate tax payers or up to £622 for higher rate tax payers.

The company would also save 13.8% on employer’s National Insurance Contributions – savings up to £402 per employee.

Childcare vouchers are a simple, flexible and tax efficient way for employers to help employees with childcare costs.

The scheme, introduced by the Government in 2005 to help support working parents, operates on a salary sacrifice whereby an employee chooses to exchange part of their salary to cover the cost of childcare for children up to the age of 16.

Companies can give employees up to £2,916 per year tax free in childcare vouchers, saving parents up to £933 each in Tax and National Insurance. Businesses save on their Employer’s National Insurance contributions.

Benefits to Employer

• Savings on Employer National Insurance contributions – up to £402 per employee per annum
• Increases staff morale and employee engagement
• Helps to recruit staff whilst demonstrating commitment to your staff
• Improves staff retention – helps to make it worthwhile to return to work
• Simple and flexible to set up – fully managed scheme or self-administration options available
• The scheme is self-financing

Benefits to Employee

• Save up to £933 per annum in Tax and National Insurance
• Double your savings if both parents join the Childcare Voucher Scheme – up to £1866 per annum
• Makes quality childcare more affordable
• Assists in managing family finances and reduces childcare costs
• Freedom to choose where and when you use the vouchers
• Childcare vouchers can be for as little as £10 per month and can be banked until required
• Childcare vouchers can be used for child-minders, nannies, day nurseries, play schemes, pre-school, before/after school clubs, boarding fees, educational centers or holiday clubs
• Key Points
• Scheme must be made available to all employees
• No minimum numbers required
• Childcare Vouchers can only be used with Registered or Approved Childcare Providers
• Salary after salary sacrifice deductions must not fall below the National Minimum Wage