It is a common perception that childcare vouchers are only used by middle income families to pay for nursery fees. In fact, childcare vouchers are available to almost all working parents* and can be used for older children to pay for a wide range of needs which are classed as "childcare". Independent schools** may accept vouchers to pay fees for children aged 0 up to and including reception year. Beyond reception level, childcare vouchers can be used to pay for non-educational care and activities such as day trips and summer camps.
Childcare vouchers can provide significant savings no matter what rate of income tax a parent pays. Whilst a basic rate taxpayer can currently save up to £933 per year, a working parent paying 40% tax can save £624 per year and an additional rate taxpayer (50%), £605. If both parents work and take advantage of the maximum amount of childcare vouchers, these savings can be doubled.
Childcare vouchers are a simple, government-backed scheme offered via the employer. Parents can join a scheme to exchange part of their salary for childcare vouchers. Savings are made as vouchers are non-taxable and National Insurance exempt.
Another benefit of childcare vouchers is that they are flexible. You do not have to use childcare vouchers in the week or month they are provided and you can save them up to use later. So, for example, you can start saving at the start of the tax year to pay for activities at the school your child will be attending in the autumn, or to pay for activities and care provided over the summer months. You will need to approach your child's school to ask whether they accept payment with childcare vouchers and for which activities.
Childcare Voucher provider, Busy Bees Benefits is actively campaigning to increase the value of childcare vouchers for parents. The savings available have not changed since 2006, although fees for all forms of childcare have continued to rise. Busy Bees' 'Mind the Gap - Raise the Cap' campaign aims to persuade the government to increase the maximum weekly limit on how much salary a parent can sacrifice in exchange for childcare vouchers to a maximum of £75 per week to keep pace with rising costs.
The e-petition at the centre of the campaign already has over 12,000 signatures. The aim is to achieve an increase in the cap as part of the 2013 Budget.
For more information about the campaign visit www.busybeesbenefits.com.
*Unless self-employed and not paying tax under PAYE or earning a low income which would mean that using childcare vouchers would take their hourly rate of pay below minimum wage levels.
**The provided must be inspected by the Independent Schools Inspectorate in England or the equivalent national inspectorate bodies in Scotland, Wales and Northern Ireland.
© Reed Business Information 2013