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Tax > Payroll Services > Inland Revenue Payroll Legislation > Tax Relief on Childcare

Tax Relief on Childcare

Many of you may have read about the tax breaks that the Government introduced to assist with "approved" childcare, which includes nannies.

There are basically two types of relief that are available.

Firstly, for families with an income of up to £58,175 (or £66,350 if there is a child under 1), childcare tax credit is available to assist with the cost of using an "approved" nanny as part of working tax credits. For further information on whether you qualify you can visit www.taxcredits.inlandrevenue.gov.uk

Secondly if your employer gives you childcare vouchers, the first £55 per week per employee is now exempt from tax and national insurance (and employer's national insurance) provided registered or approved childcare is used. If both parents receive childcare vouchers they are each entitled to receive £55 per week free of tax and national insurance. For a basic rate tax payer the tax and national insurance savings on £55 per week amount to £18.15 per week and for a higher rate tax payer the relief amounts to £22.55 per week. Childcare voucher schemes can be used as part of salary sacrifice scheme or given as an addition to salary.

A childcare voucher scheme can be set up quite easily by your employer but there are various criteria including the scheme being available to all employees. The Human Resources Department should have further details.
If you are a director of your own limited company and would be interested in setting up a childcare voucher scheme, Taxing Nannies would be happy to assist you.

How to get your nanny approved?

Up until now The Childcare Approval Scheme has been the voluntary scheme for approving childcare providers and enabling parents and employers to check if a carer is approved. An organisation called Nestor acts as the approval body on behalf of the Department for Education and Science and they provide the approval service. However this approval scheme is being phased out and from 1st October 2007 applications and renewals by nannies will be dealt with by Ofsted who will deal with the voluntary registration to the Ofsted Childcare Register (OCR).

Under the Childcare Approval Scheme:

1. The nanny has to apply for approval herself.

2. In order to apply she must ensure that she has the relevant qualifications, or has attended an approved induction course. Details of the qualifications accepted and the induction courses available can be found on www.childcareapprovalscheme.co.uk/carer/qualifications.asp. Nannies from abroad will have to provide evidence from a verifiable source and if necessary have that evidence translated into English by an accredited translation agency, Embassy or High Commission. In view of the time it may take to verify the evidence, it may be easier to attend an acceptable induction course, details of which can be found on the above website.

3. The nanny must also hold a certificate in first aid that is suitable to the care of babies and children and is not more than three years old at the time of approval (e.g. dealing with emergencies, resuscitation, shock, choking and anaphylactic shock).

4. The nanny must complete an application form, which can be found on www.childcareapprovalscheme.co.uk/application.asp. It then needs to be sent to Childcare Approval Scheme, 2nd Floor, Westbury House, 23/25 Bridge Street, Pinner, HA5 3HR.

5. There is an annual fee of £99 which can be paid by debit card or credit card by telephoning 0845 767 8111. This covers a CRB enhanced check being carried out which also includes a Protection of Children's Act list check.

For further information on the scheme please contact 0845 767 8111 or visit www.childcareapprovalscheme.co.uk

Voluntary registration to the Ofsted Childcare Register can take place from 1st April 2007 so for six months to the two approval schemes will overlap. The registration requirements for this body are as follows:

1. The applicant will need to demonstrate suitability.

2. The applicant will be required to apply for a CRB check and have their identity checked at a local post office

3. A certificate may be required where the applicant has lived abroad within three years of making the application.

4. Ofsted will seek confirmation from applicants that they are not disqualified from providing childcare.

5. The applicant will be required to hold a current first aid certificate

6. Applications can be made in writing to Ofsted, National Business Unit, Royal Exchange Buildings, St Ann's Square, Manchester, M2 7LA, by phone on 08456 404040 or online on https://online.ofsted.gov.uk/OnlineOfsted/default.aspx

7. The current cost is £100 but after April 2008 there will be a charge of £36 for the CRB check and a further £8 administration fee.