Childcare vouchers can be offered to you by your employer in addition to your salary but are more commonly offered as a “salary sacrifice”. This means that you sacrifice a specific amount of your salary and receive that equivalent amount in childcare vouchers. This means you will only pay tax and NIC on the reduced level of your salary.
For more information on childcare vouchers visit the Day Care Trust or contact us. The key is they enable you to pay for childcare out of your pre-tax and National Insurance income. While this doesn’t sound like much, the benefit is huge.
It works by ‘salary sacrifice’
A few very generous employers will simply give you the vouchers on top of your normal salary, but most will ask you to do what’s called a ‘salary sacrifice’, which works something like this: you give up £1,000 of salary but after tax and National Insurance that is only worth about £700 in your pocket – so in return you get £1,000 of vouchers and you are £300 better off.
For an accurate figure of savings look at calculators on Accor Services or Computershare Voucher Services. Always check first if you’re eligible for tax credits.