PARENTS could claim up to £1,900 in childcare vouchers to cover the cost of summer holiday clubs – and you could get more than under tax-free childcare.
Childcare vouchers closed to new applicants in October 2018 with parents now having to apply for tax-free childcare instead.
3 Here’s how tax-free childcare compares to childcare vouchers
But the 780,000-odd parents who currently claim childcare vouchers, according to the Childcare Voucher Providers Association, can still continue to do so.
So as long as you don’t leave your company and your employer still offers the vouchers, you just need to make sure you order them once a year to remain eligible.
On the face of it, the two schemes pay roughly the same amount – childcare vouchers pay up to £1,866 a year to parents (£933 to single parents).
While tax-free childcare pays up to £2,000 per child whether parents are single or not.
What help is available for parents?CHILDCARE can be a costly business. Here is how you can get help:
30 hours free childcare – Parents of three- and four-year-olds can apply for 30 hours of free childcare a week.To qualify you must work at least 16 hours a week at the national living or minimum wage and earn less than £100,000 a year.
Tax credits – For children under 16, some working families can get up to £122.50 a week depending on their income to help with childcare costs.
Childcare vouchers – If your employer offers childcare vouchers you can get up to £933 a yeaar in tax and national insurance savings.You pay for your childcare before your tax contributions are taken out.This scheme is now shut to new joiners.
Tax-free childcare – Available to working families and the self-employed, for every £8 you put in the Government will add an extra £2.
The schemes, however, work slightly differently and that means some parents could earn more under childcare vouchers.
Becky O’Connor, a personal finance specialist at provider Royal London, said: “Comparing the two schemes to work out what is best for your family is notoriously difficult because they work in totally different ways and have different criteria.
“But the risk of not comparing them is that some parents may leave the old voucher scheme not knowing they were better off on it and missing out on tax savings potentially worth thousands on childcare for their school-age children.”
She added: “Parents whose children are in school and only need childcare after school and in the holidays, tend to receive less support on tax-free childcare and are in general likely to be better off on vouchers.
“But tax-free childcare tends to work out better for those with higher childcare costs, for example, when children are in nursery in the pre-school years.”
3 Parents still eligible for childcare vouchers should check what scheme is best for themCredit: Getty – Contributor
Ms O’Connor cites the example of parents paying the typical £7,000 a year for after school and holiday clubs for two children.
Here, assuming the parents are basic rate (20 per cent) taxpayers, she says parents the £1,866 parents would save under childcare vouchers is about £460 more than the roughly £1,400 they’d get under tax-free childcare.
We look at how the schemes works and which might be best for you.How do childcare vouchers and tax-free childcare work?
Tax-free childcare effectively gives parents a 20 per cent discount on childcare costs up to a maximum of £2,000 a year per child.
So for every 80p you spend on childcare you get an extra 20p on top.
To get the full £2,000 a year, you’d need to spend at least £10,000 a year on childcare costs.
The scheme is open to working parents, including the self-employed, who together earn between £6,830.72 a year and £100,000 a year and have children aged 0- to 11-years-old.
Roughly 1.4million working parents can use this cash to cover school holiday clubs and summer camps – here’s how to apply.
When it comes to childcare vouchers, you effectively give away some of your salary in exchange for vouchers from your employer, and in doing so you save on tax and national insurance.
3 You could be eligible for childcare help worth thousandsCredit: Getty – Contributor
The maximum gain for doing this is £933 a year per parent – so £1,866 if you’re part of a couple and you can both apply.
But the amount you can claim depends on your tax rate – the more tax you pay the less you’ll get from childcare vouchers.
Here, just the one parent needs to work to qualify and there’s no minimum or maximum wage limit.Which scheme is best for me?
Childcare vouchers are generally best where:
Only one parent works – as both parents have to work for tax-free childcare
Parents earn under £6,830.72 a year or more than £100,000 a year – as parents have to earn within these limits for tax-free childcare
Parents have childcare costs for children aged 12 to 15 – as only children up to 11 are covered under tax-free childcare
Basic rate taxpayer parents with childcare costs of £9,336 or less – MoneySavingExpert.com calculates that the saving you’d make with childcare vouchers would be more than the saving you can make with tax-free childcare. See MoneySavingExpert.com for more information on what this means if you’re a higher or additional rate taxpayer.
Meanwhile, tax-free childcare is generally best in the following circumstances:
For self-employed parents – as they don’t qualify for childcare vouchers.
Parents with a large number of children – as the annual £2,000 limit is per child rather than in total
Basic rate taxpayer parents with childcare costs of more than £9,336 a year. See MoneySavingExpert.com for more information on what this means if you’re a higher or additional rate taxpayer.
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From tax-free childcare to free nursery hours – we’ve rounded-up the childcare help worth £5,000-plus parents may be missing out on.
Plus, these are the ways to cut the cost of childcare from discounts to community nurseries.
And Sainsbury’s has launched summer holiday childcare for just £7.50 a day – and it includes lunch.
Sainsbury’s launches summer holiday childcare for just £7.50 a day including lunch and outdoor activities
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