Are you unsure about what the best scheme is to help pay for your childcare? You may be unsure about what the best tax relief option is, but don’t despair as our blog below will provide all the information that you will need…

What does this mean?

If you, as an employee, have joined your employers’ childcare voucher or an employer-supported childcare scheme before 4 October 2018, then you will continue to receive the associated tax relief.

You should keep in mind that this may not always be the best option for you as an employee as it will depend on your circumstances.

In some situations, the best option for an employee is to sign up to the Government’s top-up scheme instead.

The Government scheme allows parents to open an online account where they will receive a tax-free top up of 20p for every 80p that they put into the account.

You should be aware that as a parent you cannot benefit from both the employer scheme and the Government scheme, so must choose one based on what is the option for you.

What tax relief is available?

If you joined an employer childcare voucher scheme prior to 4 October 2018, then you can continue to receive the associated tax relief.

If you receive childcare vouchers or directly-contracted child care, then these will both be tax and national insurance free up until the exempt amount.

The rate at which they will pay tax will be will depend upon when the employee joined the scheme and whether the employee joined before or after 6 April 2011.

Which scheme is best?

If you as an employee joined your employers scheme on 6 April 2011 or after, the tax relief from employer scheme is £11 per week (£583 per year). If both parents receive the vouchers the tax relief will be £1,166.

Alternatively, under the Governments scheme, parents would need to contribute £2,332 to receive a top up of £583 and £4,664 to receive a top up of £1,166.

You should be aware that there is a maximum amount of £2,000 top-up available, but you would have to pay £8,000.

Further Actions

You should look into both schemes and figure out the numbers and decide what is the best option for you.

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Any questions?
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