Information on Childcare Vouchers including how the Childcare Voucher Scheme works, figuring out whether you are eligible, how to apply in the UK and more.
How do Childcare Vouchers work?
Through the Childcare Voucher Scheme, your employer may be able to provide you with Childcare Vouchers, which you can use to pay for registered childcare (such as nurseries and day care). These could save you money in the long run and are well worth looking into.
You can use Childcare Vouchers in the UK as full or part-payment for a:
- Day nursery
- Nursery school
- Holiday scheme
- Qualified nanny/au pair
- Out of school club
- Holiday play scheme
Different bodies regulate registered childminders, nurseries and day care facilities in different UK countries:
- Ofsted in England
- The Care and Social Services Inspectorate for Wales
- The Scottish Commission for the Regulation of Care
- A Health and Social Services Board or Trust in Northern Ireland
How much could you receive through the Childcare Voucher Scheme?
In the case of Vouchers (and directly contracted childcare) there is an allowance of £55 per week or £243 per month, if you're a basic-rate taxpayer. Up to these amounts you will not have to pay tax or National Insurance (NI). This applies to each individual parent, so if you both have access to a scheme, you can claim double the allowance i.e. £110 per week and £486 per month. You can receive more vouchers than this amount but you will have to revert to paying the tax and NI contributions for any value over this limit. There is no limit on the amount you can actually use. You can also store them up for use at other times throughout the year, for example childcare needs will often end up being higher in the school holidays.
How do you receive Childcare Vouchers?
Speak to your employer to find out whether they provide Childcare Vouchers. There are a few ways your employer could provide you with them namely in addition to your salary; or as part of a salary sacrifice scheme.
In the first case, this will not normally change your tax situation as the additional amount (within the above limits) is not taxed anyway. However, a salary sacrifice scheme is different as this reduces your overall income and therefore reduces the amount of tax and NI that you pay. If you’re claiming state benefits to boost your income they will be revised downwards to account for this.
It’s worth seeking advice from your employer and discussing it with HMRC or your benefits office when you’re making any decisions.
Childcare Voucher Checklist
- Check whether your employer’s childcare vouchers are a benefit that is paid on top of your normal pay or whether you are expected to give up salary.
- Work out how your tax credits will be affected.
- If your cash pay is affected, check to see how your other earnings-related payments will be affected (e.g. pension, overtime rates, pay rises etc).
- If your cash pay is reduced, will your benefits-related payments be affected, such as state pension?
- If your cash pay is reduced, will your student loan repayments be affected?
Directgov has full information on what entitlements and help are available for working parents.
HMRC has further information on Childcare benefits.
The Families information service (FIS) can help you to identify registered childcare in your area.
Childcare Vouchers has full information on the voucher scheme.