Tax
Efficient Benefits - Childcare Vouchers
The Government issued a consultation document in
December 2004, which suggested that Childcare Vouchers
could be made both tax and National Insurance (NI)
exempt. This became a reality in Gordon Brown’s
budget speech in April 2005, and has led to a huge
increase in the demand for employers to add Childcare
Vouchers to their list of benefits.
Since this new tax break
we have seen take up levels increase from an average
of 2% to in some cases as high as 10%. We normally
favour a fully electronic method of transferring
funds directly to the Child Carer/Nursery.
Once the employee applies and chooses the level
they wish to have deducted the money is transferred
by the employer into their own personal childcare
account, where they can authorise the funds to be
transferred directly to the childcare provider.
PLEASE NOTE:
No employee can be eligible for salary sacrifice
if the amount deducted takes them below the minimum
wage. The new tax break
came into effect from April 2005 and was exempt
to a maximum of £216.66 per month.
This amount was increased in April 2006 to £243
per month.
