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Home arrowEmployer Information arrowTax Relief Childcare


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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.



Child Tax Credits
Childcare tax credis may be available to assist with the cost of using an "approved" nanny as part of working tax credits but this will depend on the level of income and the number of children and the number of hours the parents work. For further information on whether you qualify you can visit www.hmrc.gov.uk/taxcredits

Childcare Vouchers
If your employer gives you childcare vouchers you will be eligible for tax relief on those vouchers, provided approved childcare is used, and this will normally be implemented by a salary sacrifice system.  The rules regarding tax relief on childcare vouchers has recent ly changed as follows:

 
> If you were already in a voucher scheme on 5 April 2011, the first £55 per week per employee will continue to be exempt from tax and national insurance (and employer's national insurance)
 
> Since 6 April 2011, employers will be required at the beginning of the relevant tax year to estimate the level of basic employment earnings that any new employee joining the scheme is likely to receive and the employee will only be entitled to vouchers of £28 per week for a 40% taxpayer and £22 per week for a 50% taxpayer.
 
If both parents receive childcare vouchers they are each entitled to receive the above limits per week free of tax and national insurance. For a basic rate tax payer and for higher rate taxpayers joining a scheme after 5 April 2011, the tax and national insurance savings on £55 per week amount to £17.05 per week and for a higher rate taxpayer already in the scheme the relief amounts to £22.55 per week for a 40% taxpayer and £27.50 for a 50% taxpayer. Childcare voucher schemes can be used as part of a 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?

If you decide you would like your nanny to be approved this is done by voluntary registration to the Ofsted Childcare Register. Your nanny can apply online on www.ofsted.gov.uk or by telephone on 08456 404040, or you can ask for a form for her to complete in writing. Ofsted will write to you to let your nanny know that they have received the application. The letter will include details on how to:
  • obtain an enhanced CRB disclosure, unless Ofsted already hold a disclosure carried out within the past three years
  • arrange a check of your nanny's identity, the first aid qualification and any other information they need at a local post office
  • pay the non-refundable application fee of £103
  • provide any further information they need to decide on suitability of your nanny to provide childcare