Joining the Childcare Vouchers scheme could save a family nearly £2,400 per year - we show you how.
Astute Fools may have noticed that I haven't been writing for a while. The reason for this, as some have correctly guessed, is because I've been on maternity leave following the birth of my baby in the spring. Aah!
Of course, my returning to work has meant that my husband and I have had to find suitable childcare arrangements for our daughter, which, as all family Fools know, is not a cheap business. Childcare costs in the UK are the highest in Europe, and with the average full time cost of a nursery place in the UK costing £141 a week, and those in London and the South East costing far more that that, every penny counts.
Of course, as a money-saving Fool I've been investigating ways that parents can save on their childcare costs and one of the best ways, of course, is through the Government's Childcare voucher scheme.
The way in which the scheme works is by allowing working parents to sacrifice some of their salary in return for vouchers that can be used to pay for all or part of their childcare costs. Each parent can buy up to a maximum of £55 worth of vouchers each week, or £243 each month, and by buying the vouchers with your gross salary, you avoid having to pay tax or National Insurance - meaning that, according to Accor Services, a basic rate taxpayer could save up to £916 per year, and a higher rate taxpayer a whopping £1,196. So, if both parents can purchase the vouchers individually, a family could save nearly £2,400 per year on its childcare costs.
Employers benefit too.
What's more, as your employer doesn't have to pay National Insurance on the vouchers you buy either, it stands to save 12.8% (or around £370) per employee joining the scheme. However, it's worth noting that although some larger firms do set up their own scheme, most tend to use one of the many childcare voucher providers out there, which charge between 1.5% and 10% for their services. Some of this cost can be offset against the company's tax bill but it will inevitably eat into the saving your company could potentially make. However, it should at worst work out to be cost neutral, and at best still provide a decent saving per employee.
The vouchers can be used to pay for the following types of childcare:
- Day Nursery
- Nursery School
- Childminder
- Crèche
- Pre-School
- Nanny
- Au Pair
- Out of School Club
- Holiday Play Scheme
A large number of parents in the UK could therefore potentially benefit from the scheme. Try using this calculator to find out how much you could save.
What do you have to do?
So what do you have to do to buy the vouchers? Well, firstly you need to find out if your employer offers the Childcare voucher scheme, so check with your HR department. Any parent with a child up to the age of 15 (16 if they are disabled) is eligible to buy and use the vouchers. And whilst both parents can apply (as long as their firms participate in the scheme) unfortunately the number of children you have is not a factor.
If your firm does offer the vouchers, you may need to sign an amended contract stating your new "lower" salary, as a result of the salary sacrifice. Consequently, you may find that your entitlement to benefits/tax credits and indeed pension contributions are also affected, so ask your HR department or find out more at the HM Revenue & Customs site.
You should also check that the childcare you use is registered and approved and accepts the vouchers, as to benefit from the tax and National Insurance exemption it will need a current registration certificate with a URN reference number, or an approval certificate with an expiry date and reference number.
What if your company doesn't participate?
If your company isn't currently offering the scheme, it could be worth your while (and theirs) suggesting it. After all, with potential savings of up to nearly £1,200 for the employee and £370 per employee for your company, it could be quids in.
For a start, have a chat to your HR department. Ask around to see how many other parents would be interested - if there are a number of you it definitely makes the case stronger. Many firms worry that the administration side of the scheme would vastly increase the monthly workload of those managing it. However, having spoken to Accor, one of the many childcare voucher providers, I have been assured that once set up, the scheme requires minimal administration, particularly if the electronic vouchers have been chosen. Some of the voucher providers will even approach your company for you, if you ask.
Childcare Voucher providers:
So, if you'd like to cut the cost of your childcare, consider signing up for Childcare Vouchers, or ask your company to look into it. You could save a small fortune.
Find other ways to crop your childcare charges here.