Benefits of salary sacrifice
Before you can start benefiting from Childcare Vouchers, your employment contract will need to be updated with the inclusion of a signed agreement, which confirms your acceptance of the salary sacrifice.
Your employer pays no NI on the amount agreed giving them savings of up to £402 for each employee. And you pay no NI or tax meaning you can save about £1,000 per year.
Our Salary sacrifice guide will provide you with more detailed information.
Child Tax Credits & Working Tax Credit
The Working Tax Credit (WTC) and Child Tax Credit (CTC) started in April 2003. The amount of WTC award depends on a number of factors including the number of hours you work, how many children you may have and whether you pay any eligible childcare costs. Choosing Childcare Vouchers may have an impact on your eligibility for CTC.
Will you be better off accepting Childcare Vouchers in return for a salary sacrifice or claiming tax credit help towards your childcare costs?
- Families will always benefit from taking a tax and NIC free voucher if it is offered to them on top of their salary.
- Generally families will benefit from taking childcare vouchers when the amount of their qualifying childcare costs are greater than the current childcare limits (£175 a week for one child, £300 for two or more children.)
- Generally, families who are receiving tax credits at the family element or less when they are claiming for the childcare element in Working Tax Credit (£545 or less) will gain from claiming the tax and NICs exemption.
- Generally, families who are receiving tax credits at a level greater than the family element will not gain from claiming the tax and NICs exemptions unless the person offered the Childcare Vouchers is a higher rate tax payer.
- Families receiving Childcare Vouchers from their employers cannot then claim the childcare element of Working Tax Credit on the same costs.
Find out more
Are you eligible for Childcare Vouchers?
Where can I use Edenred Childcare Vouchers?