​Childcare Vouchers for Small Businesses

The childcare voucher scheme allows parents to receive up to £55pw or £243pm of childcare vouchers from their employer, free of tax and National Insurance. The vouchers can be used for a range of childcare for children up to the age of 15.

Childcare vouchers are often provided through salary sacrifice. Swapping taxable pay for tax-free childcare vouchers saves basic-rate taxpayers up to £933 a year. At the same time, employers save up to £402 a year in employer National Insurance contributions.

The tax-exempt thresholds are:

  • Basic-rate taxpayer £55/w £243/m
  • Higher-rate taxpayer £28/w £124/m
  • Additional-rate taxpayer £25/w £110/m

However the vouchers can also be provided in addition to salary which could be useful for directors. The current monthly lower limit of £641 could be increased to £884 per month. The employer then pays the childcare provider £243 directly and then £243 is deducted from the employee’s payslip to leave them net pay of £641.

The result of this is that the employer can then show £2,916 in their accounts as Childcare Voucher costs which the director would have had to pay anyway.

Unfortunately, child care is not a deductible expense for sole traders / self-employed.

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