Childcare Vouchers
Following recent changes introduced by the Government, parents
may benefit from Government help with childcare in several ways,
including Childcare Vouchers and the childcare element of Working
Tax Credit. PAYE for Nannies can provide general advice on many
of these matters but parents are advised to read the relevant
government publications or call HM Revenue and Customs tax credit
help line (Tel: 0800 300 3900) for definitive answers relating
to eligibility and the amount which may be able to be claimed.
Childcare Vouchers
PAYE for Nannies operates many payroll schemes for parents who
currently use Childcare Vouchers and can answer most general queries
about this initiative. Childcare Vouchers are not means-tested
and are therefore potentially available to all families, even
those with above average incomes. They can provide a significant
saving of as much as £2,000 per year in relation to the
cost of employing a nanny. Parents need to participate in a Childcare
Voucher scheme operated by one or both of the parents' employers
and can each obtain vouchers worth up to £50 per week through
such a scheme. The cost of these vouchers is deducted from the
parents' gross salary (before deduction of tax and NI) and a higher
rate taxpayer will therefore effectively obtain a £50 voucher
for a sacrifice in net salary of less than £30, thus saving
£20 per week. As both parents can participate, the vouchers
offer potential savings of up to £40 per week. As all tax benefits relate to the parents' employment, the overall nanny tax charge remains unchanged.
Any nanny being paid via the voucher scheme is required to meet
certain criteria and to be registered as a childcare provider.
PAYE for Nannies can provide advice on the approval process and
likely costs.
Working Tax Credits
Working Tax Credits are a means-tested benefit aimed at low income
families. In general, families with a total family income of less
than £5,000 will qualify for maximum benefits but these
are reduced sharply for families with a total annual income of
£25,000 or more, tail off to about £4 per week at
an annual income of £55,000, and cease completely at about
£59,000. The "Childcare Element" of Working Tax
Credits is meant to provide support for the childcarers of families
receiving Working Tax Credits, but PAYE for Nannies would point
out that means testing will again result in any benefit being
reduced or eliminated for families on above-average earnings.
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