What are childcare 'vouchers'?
Actually, they are not necessarily vouchers at all - at least not in the physical sense. The term really refers to a couple of government schemes that either provide a set amount of free childcare, or subsidise it through tax efficient employer schemes.
In essence, however, both are designed to make access to childcare more affordable, and accessible to everyone.
What are the options?
There are two schemes. Firstly, every child aged three and four is entitled to a minimum of 15 hours per week of free education for 38 weeks of the year. Sometimes referred to as Early Years Free Entitlement (EYFE), this education can take place at pre-school, nurseries, playgroups, or with childminders. In this case, you don't get a voucher as such, but will get 'free time' at a child care provider registered to operate under the scheme.
Secondly, the Childcare Voucher scheme enables your employer to provide you with vouchers to spend on childcare for any child up until the September after their 15th birthday (or 16th for disabled children). This scheme is available to anyone with qualifying children, as long as their employer is operating a voucher scheme.
How does the EYFE scheme work?
If your childcare provider is registered to provide care under the voucher scheme, they will normally do the applications and administration on your behalf. You just have to decide which days of the week to use them on, based on your needs and those of your child.
The dates on which children become eligible vary according to date of birth - Children born between the 1st April and the 31st August will be eligible on the 1st September after their third birthday, those born between 1st September and 31st December become eligible on the 1st January, and those born between 1st January and the 31st March become eligible on the 1st April. In all cases, the funding will remain available until the child reach statutory school age.
Check that your childcare provider is able to offer the scheme
Check when your child becomes eligible
Talk to your childcare provider about applying
How does the Childcare Voucher scheme work?
If your employer offers the scheme, you can 'buy' vouchers in a number of ways - but it will usually be via 'salary sacrifice' whereby the cost of the vouchers is deducted from your salary before tax. This means that, whilst you still pay for the cost of childcare, you save money by not paying income tax or National Insurance on the part of your wages used to pay for the vouchers. For example, if you are basic rate tax payer, for every £1000 you spend on vouchers, you will save around £300 in tax.
Alternatively your employer may be willing to increase your salary to cover the cost of the vouchers. This is called a 'salary addition' scheme, and the same tax savings apply.
Check that your employer offers the scheme and whether you would need to do it on a salary sacrifice basis, or whether a salary addition option is available
How much help can I get?
Childcare vouchers are available as a tax and National Insurance free allowance for every working parent. At present, this stands at £55 per week for childcare paid for on a weekly basis and £243 per month for childcare paid for on a monthly basis. Both parents can claim their Childcare Voucher allowance, if working, so you could get double that amount.
What kind of childcare can I pay for with Childcare Vouchers?
As with the EYFE scheme, Childcare Vouchers can be spent on anything from pre-school and nurseries to playgroups and childminders - as long as they have signed up to the scheme.
Check that your provider is registered to provide care under the voucher scheme
Who can claim for childcare vouchers?
Anyone with parental responsibilities for a child under the age of 15 (or 16 if they are disabled) can claim for childcare vouchers.
How do I apply for Childcare Vouchers?
You need to speak to your employer to find out if it offers a voucher scheme. Your line manager or human resources team would be a good place to start.
What if my employer does not offer the scheme?
It is not compulsory for employers to offer the scheme. However, any employer can join and offering it costs nothing - in fact employers save a small amount of money for every employee registering.
If your employer does not currently offer Childcare Vouchers, suggest it registers.
Suggest that your employer registers with the Childcare Voucher scheme if they haven't already done so
How much would I save by using vouchers?
Based on a maximum allowance, a 20% (basic rate) tax payer would save just over £75 per calendar month, or £900 per year. A higher rate tax payer would save almost £100 or £1200, respectively.
When can I start buying vouchers?
You can start as soon as your child is born, and either use them straight away, or save them up for use in the future.
Would using Childcare Vouchers affect my eligibility for Working Family Tax Credit and/or the Child Tax Credit?
If you are already receiving either or both of these tax credits, you probably already know that they are far from simple. It's generally an either/or option but whether you will be better off taking advantage of the childcare voucher scheme via salary sacrifice or claiming for help towards the cost of childcare via tax credits will depend a lot on your individual circumstances.
HMRC do offer some information about how the two schemes interact on their website; however, as there is a possibility that tax credits may be affected by participation in the childcare voucher scheme it is always best to check your individual circumstances by calling HMRC on 0845 300 3900.
Can I use vouchers to pay a family member for childcare?
Yes, but only if they operate a registered childcare service. You can't use them to pay for informal childcare arrangement.
Can I use them to pay school fees?
You can't use childcare vouchers to pay school fees but you can use them to pay for things like after school and holiday clubs.
How do I actually receive the vouchers?
The vouchers you buy through the scheme will be sent to you by email, at the address you register with. Then it is simply a case of passing them on to your provider. Each voucher will include your child's name and reference number, so your childcare provider can keep track of your voucher payments. Alternatively, they can be sent directly to your childcare provider. Vouchers will usually be paid on or around your normal pay day.
Is there any help available for parents who are in training rather than in work?
Yes, the Free Childcare for Training and Learning for Work Scheme is to help parents back to work by providing free childcare while they are in training or learning. You must meet certain eligibility criteria - for instance one partner must already be in work and your household income must not exceed £20,000.
Childcare changes from 2017
From 2017, 30 hours of free childcare will be available per week for working parents of 3 and 4 year old children.
The childcare voucher scheme will also be replaced by a tax-free childcare scheme.