Some employers offer support for the childcare costs of their employees, perhaps by offering a place at a workplace nursery or childcare vouchers, which may be exempt from tax, National Insurance and reporting obligations. For any employees who applied to join a childcare scheme run before 6 April 2011, the limit is £55 a week, or £243 a month. There are different rules for employees who joined employer-supported childcare schemes on or after 6 April 2011.
An employer that offers childcare support to staff will now be doing so under what is commonly known as a 'salary sacrifice' scheme. This section explains what a salary sacrifice scheme is and how it can potentially impact on an employee’s earnings, benefits and tax credits.
The government has announced that the tax PAYE (income tax) advantages of some employee benefit arrangements offered through salary sacrifice schemes ended for anyone newly joining a scheme in April 2017. The Money Advice Service has more information on this.
The information contained here is guidance only and is based on information from HM Revenue and Customs. Any employee who is considering using childcare support on offer from her or his employer through a salary sacrifice scheme is strongly advised to consider the implications for their contract of employment, pay, in-work benefits, state benefits and tax credits, and consult their trade union and/or a legal and/or financial adviser.
Family and Childcare Trust – tel: 020 7940 7510; email: firstname.lastname@example.org.
Maternity Action – advice line: 0808 802 002 9.
Action for Children – contact: 01923 361 500.
The Low Incomes Tax Reform Group aims to persuade politicians and HMRC to make tax rules simpler and fairer – especially for the benefit of those on low incomes. It has produced guidance on the Employer Supported Childcare scheme and the implications for those currently claiming tax credits. Our thanks to them for their assistance with the advice in this section.