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: 0845 300 3900) for definitive answers relating to eligibility and the amount which may be able to be claimed.
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 over £1,000 per year in relation to the cost of employing a nanny if both parents participate. 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 £243 per month (£124 per month for 40% taxpayers) 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 £124 voucher for a sacrifice in net salary of less than £74, thus saving over £50 per month. As both parents can participate, the vouchers offer potential savings of over £100 per month in total. 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 £6,420 will qualify for maximum benefits but these are reduced sharply as total annual income rises. 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.