Childcare Vouchers & Tax Credits

Childcare Vouchers

Childcare vouchers are a simple, straightforward way to pay for quality childcare. It is a way in which employers can assist their employees with the costs of childcare. You don’t pay tax or National Insurance on childcare vouchers to the value of £55 a week – so working parents can save as much as £1,195 a year – double, if both parents sign up for a childcare voucher scheme.

How does the scheme work?
Your employer will normally sign up to a childcare voucher company and will pay that company an administration fee for their service. The voucher company will either supply you directly with your childcare vouchers or they will provide your employer with them, which they will distribute to staff accordingly. Employees in receipt of childcare vouchers may be able to use them to ‘pay’ their nanny or other registered forms of childcare. The nanny will then redeem the value of the voucher from the childcare voucher company, usually by direct payment into their bank account.

Can childcare vouchers save me money?
Childcare vouchers can be offered as a “salary sacrifice” to you or be paid in addition to your cash salary. If taken as a salary sacrifice, it means that you sacrifice a specific amount of your salary and instead receive that amount in childcare vouchers. Childcare vouchers are exempt from National Insurance Contributions (NIC), so you will only pay NIC on the reduced level of your salary, saving up to 11% on NIC. This saves money on childcare costs.

Where You can Use the Childcare Voucher
You can only use Childcare vouchers for registered or approved childcare costs. Your nanny will need to be Ofsted registered and be registered with a voucher company in order to reimburse the value of the vouchers they receive.

Child Tax Credit and Working Tax Credit
Child Tax Credit (CTC) is paid to Parents or people responsible for at least one child. It is paid by HM Revenue and Customs (HMRC) .You can get CTC whether or not you’re working. You get money for each child who you’re responsible for. If you live with someone as a couple, you need to make a claim for CTC as a couple. Tax Credit supports those on lower incomes and working parents may be eligible for additional help towards registered childcare costs. The help you get depends on some factors – income, childcare cost, size of the family
etc. For more information on Tax Credits visit