Information on Childcare Vouchers for Small Businesses
This information is for small businesses wishing to take advantage of childcare vouchers where the Parents work within their own company.
The company must be a limited company whereby the owners are Directors / employees of the company. The Scheme does not work for the self-employed.
Some smaller companies do run the scheme on an additional benefit basis which enables you to receive further income from the company in the form of Childcare Vouchers Tax and NI free (up to a maximum of £243 per month) and also the value of the vouchers and administration fees are a cost to the company and, therefore, set against the Corporation Tax.
About Childcare Vouchers
Since April 2005, companies have been able to offer employees up to £55 a week (or £243 a month) in childcare vouchers and can be provided Tax and NI FREE. This is also an efficient way of distributing company profits.
If running the Scheme on a salary sacrifice basis each employee can save up to £625 a year for higher rate tax payers or up to £933 for basic rate tax payers.The company would also save 13.8% on employer’s National Insurance Contributions.
Salary Sacrifice Scheme
In a Salary Sacrifice Scheme, employees agree to reduce their existing salary in exchange for receiving childcare vouchers. The employer and employee enter into a Salary Sacrifice Agreement and the employer then amends the payroll to reflect the change in salary. Salary Sacrifice Schemes need to be notified to the Inland Revenue.
Addition to Salary Scheme
In an “Addition to Salary” scheme, employees receive childcare vouchers on top of their salary. The vouchers can still be provided Tax and NI free. There is no need to seek Inland Revenue approval and providing the vouchers are kept within the prescribed limits (£55 a week or £243 a month), they do not have to be declared on P11Ds.
Self Adminstered Childcare Voucher Scheme
If you are a small business with less than 25 employees and interested in a Self-Administered Scheme please see our Self Administered Childcare Voucher Scheme page.