From 6th April 2005 an employer can pay directly towards a childcare service such as a workplace nursery, a subsidy to a registered provider outside of the workplace, or by selling a childcare voucher to the employee (usually via a childcare voucher company who the employer contracts to administer the scheme). The employer then deducts the amount paid out in vouchers from the employee’s taxable salary – and this amount is exempt of tax and NICs for both the employer and the employee.
Each employee is entitled to receive up to a maximum of £55 per week in childcare vouchers under a salary sacrifice scheme. This means that while there is no limit to the amount of childcare vouchers an employer can supply, only the first £55 a week qualifies for NICS exemptions for the employer and NICs and tax exemption for the employee.
