Some employers offer support for the childcare costs of their employees, perhaps by offering a place at a workplace nursery or by offering childcare vouchers.
In 2005 the Government changed tax and National Insurance regulations, so that neither the employer nor the employee pays tax or NICs on the first £55 of childcare support.
An employer that offers childcare support to staff will now be doing so under what is commonly known as a ‘salary sacrifice’ scheme. This briefing explains what a salary sacrifice scheme is and how it can potentially impact on an employee’s earnings, benefits and tax credits.
Disclaimer
The information contained in this briefing is guidance only and is based on information from HM Revenue and Customs. Any employee who is considering using childcare support on offer from her or his employer through a salary sacrifice scheme is strongly advised to consider the implications for their contract of employment, their pay, in-work benefits, state benefits and tax credits, and consult their trade union, and/or a legal and/or financial adviser.
To find out more about tax and NICs in relation to employer supported childcare, see the childcare section of the HMRC website www.hrmc.gov.uk/childcare
Daycare Trust. Tel: 020 7840 3350. email info@daycaretrust.org.uk www.daycaretrust.org.uk
Maternity Action. Information line: 020 7490 7638. www.maternityaction.org.uk
4Children - Tel: 020 7512 2100 Fax: 020 75376012 href="http://www.4children.org.uk/"www.4children.org.uk
The Low Incomes Tax Reform Group aims to persuade politicians and HMRC to make tax rules simpler and fairer - especially for the benefit of those on low incomes. It has produced guidance on the Employer Supported Childcare scheme and the implications for those currently claiming tax credits. www.litrg.org.uk
Thanks to the Low Incomes Tax Reform Group for their assistance with the advice in this section. www.litrg.org.uk
