Frequently Asked Questions - Childcare Vouchers via Salary Sacrifice
- If I join, can I leave the scheme at any time?
You are required to remain in the scheme for a minimum of 12 months, unless you experience a lifestyle change, such as leaving the company or your child starts school. See terms and conditions for further examples.
- Is the scheme just for parents with young children?
No - vouchers can be used for almost all forms of childcare for children up to 15 years of age.
- Who can I give my Vouchers to?
You can use vouchers to pay registered Day Nurseries, Child Minders, After School Clubs, & Holiday Playschemes. A Nanny or home carer, who has obtained approved status (excluding family members).
- How much will I save?
Childcare Vouchers are exempt from Tax and National Insurance up to limit of £55 a week/£243 a month and deemed non-pensionable if you are in the NHS Pension Scheme. Savings vary depending on childcare costs and how much you earn.
- Why must I earn at least £4,888?
To ensure you pay the lowest level of NI required gaining long-term benefits. If not, you could affect your entitlement to state benefits such as Job Seekers Allowance, Statutory Sick Pay and State Pension.
Examples of possible savings on £2916 vouchers p.a.:
£4,888 - £32,760 / Earn between
£4,888 - £32,760 / Earning more than £32,760 / Earning more than £32,760
Savings if contributing to NHS pension scheme? / 4.68% / NO / 3.6% / NO
% Tax saving / 22% / 22% / 40% / 40%
% NI saving / 9.4% / 11%* / 1%** / 1%**
Monthly Saving / £81.03 / £71.50 / £101.83 / £88.83
Annual Saving / £1052 / £962 / £1300 / £1,195
- *Employees not in the NHS pension scheme will make a typical saving of 11%
- ** NIC @ 1% as earnings above the lower tax bracket
If you are taking more than £55 a week in vouchers and are in the NHS pension scheme you can expect a further saving of 4.68% on the balance of your vouchers. Higher rate taxpayers can expect an extra 3.6% saving on the balance.
- What if my salary falls below the minimum wage?
You cannot sacrifice an amount that will take you below the minimum wage. (Current minimum hourly rate being £4.25 for employees aged 18-21 and £5.05 for employees aged 22 and over.)
- Will I pay tax on the value of the vouchers?
No not on the first £55 of your vouchers.
- Will sacrificing part of my salary affect my pension contributions?
Yes - vouchers are non-pensionable, so your pension contributions reduce while you receive them. However, as your pension is a ‘final salary’ scheme, this drop will have no long-term effect on your final pension, as long as you do not die or retire from the NHS whilst receiving vouchers. Please contact your payroll department for further details.
- Will sacrificing part of my salary have a negative impact in other ways?
No. Overtime, holiday, maternity and sick pay is calculated on your full salary (basic +vouchers). This is often referred to as your notional salary. For further reassurance, speak to your Practice Manager.
- Is there an upper limit to the amount of vouchers that can be ordered?
No. However above £2916 per annum there are no tax and NI benefits. But there are still pension savings.
- Can I vary the amount of vouchers I want each month?
No. You need to sacrifice a fixed amount from your salary each month. You can change the voucher denominations if necessary – as long as you have the same overall amount.
- So what if my childcare costs vary throughout the year?
You need to consider this before deciding how much salary you’d like to sacrifice. Vouchers are valid for 12 months, so you could choose to have more than you usually need to allow you to save some for months when your childcare costs are higher than average.
- Can lost vouchers be replaced?
Yes, we can cancel and re-issue lost vouchers.
- Can I reimburse unused vouchers for cash?
No. Your salary has been sacrificed for vouchers with no automatic right to return to your previous salary.
- What will be the effect on Working Tax Credit and Child Tax Credit?
Child Tax Credit will not be affected. In fact the amount you receive could increase if your salary reduction puts you into a lower band for calculating child tax credit. This is because when claiming Child Tax and/or Working Tax Credit your vouchers are not included as income.
When claiming Working Tax Credit your vouchers cannot be included as part of your childcare expenditure when claiming the childcare element of WTC. If you are claiming WTC, your childcare element could be reduced if you receive vouchers although your overall WTC could increase due to your reduction in salary. If you are receiving WTC, please check how your entitlement would be affected with the Tax Credit Office before joining the scheme.
- What will be the effect if I go on Maternity Leave?
You need to consider whether or not to stay in the scheme. If your earnings fall below the Lower Earnings Limit (£4,888) there may be a detrimental effect on your state benefits. If and when you resume work you can apply to join the scheme again.
- What do I tell my Childcare Provider?
Tell them you’re joining the scheme to save money and that vouchers are very straightforward. You will give them regular vouchers that they sign and send themto your employer. Once vouchers are received, payment will be made direct to their bank account. We’ll send you a Provider Pack with full information and a registration form for them to complete.
- Can I use vouchers to pay more than one Childcare Provider?
Yes, we understand that working parents often need to combine different types of care. You just need to let us know how much you’ll pay each one. Each provider will need to register on the scheme.
- Whilst in the scheme, can I change my childcare arrangements?
Yes, your new Childcare Provider will need to register to be eligible. Call us and we’ll send you a Provider Pack to give to them.
- Will my voucher be acceptable to my childcare provider?
Most providers accept vouchers, especially when it is explained how simply they work. There are advantages to them of regular payments by BACS direct to their own bank account.
- What happens now?
Once all the forms are returned from yourself and your Childcare Provider, you will be registered on the scheme. Vouchers can then be issued.
- Can both my partner and I claim the £55 a week tax exemption?
Yes, if both your employers operate a childcare voucher scheme the allowance is per employee not per family.