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Some employers offer support for the childcare costs of their employees, perhaps by offering a place at a workplace nursery or childcare vouchers.
In 2005, the government changed tax and National Insurance regulations, so that neither the employer nor the employee pays tax or National Insurance Contributions (NICs) on the first £55 of childcare support.
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 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: 0845 600 85 33.
4Children – helpline: 020 7512 2100; email: info@4Children.org.uk.
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.