Childcare Vouchers

What are childcare vouchers?

Childcare vouchers are a way of paying for certain types of childcare.

If your employer provides you with childcare vouchers you will not have to pay tax or NICs on the first £55 per week, or £243 per month. However if your vouchers are worth more than this, you will have to pay tax on the remainder.

For tax purposes you are only entitled to one exempt amount of £55 per week (or £243 per month) regardless of the number of jobs or employments you may have. For NICs you can receive an exempt amount from more than one employer. If both you and your partner are provided with childcare vouchers you are each entitled to an exempt amount of childcare vouchers.

You may get paper or electronic vouchers directly from your employer or your employer may ask a childcare voucher provider to provide them directly to you. Your employer will tell you which type of voucher (paper or electronic) that they will make available to you or if you can choose.

You do not have to use childcare vouchers in the week or month they are provided. If you do not wish to use the vouchers immediately you can save them up to use later. For example, your childcare costs may be more than usual during school holidays, and you may want to use them then.

Information your childcare provider will need

If you decide to get childcare vouchers, check that your childcare provider will accept them. If the care provider will accept them, and you have a choice of paper or electronic vouchers, ask which the carer would prefer. Your employer or your employer's voucher provider will normally be able to answer any questions that your childcare provider has. It is possible that the childcare provider already accepts voucher payments from the voucher provider chosen by your employer.

Your childcare provider will need to make an arrangement with your employer or your employer's voucher provider to receive payment. This is normally a simple process which will be advised to you by your employer.

If the voucher doesn't cover the whole cost of the childcare, agree with your childcare provider how you will pay the extra.

Things to remember

You need to have actually received your childcare voucher or vouchers before you can use them. They cannot be backdated. You will only receive tax and NICs exempt vouchers after you have formally agreed with your employer to join a childcare voucher scheme.

For example, if you are due to pay your carer on 1 May and your first childcare vouchers are due to be issued on 15 May, you will be required to pay your carer in full on 1 May and use your childcare vouchers for the fees due on 1 June.

When you first join a voucher scheme, it may take some time to set up. You may find that the cash element of your salary has been reduced before you receive your vouchers, or you don't get vouchers when you expect to, contact your employer or the voucher provider as soon as possible. You will find a helpline number or contact details on the information pack which will normally have been sent to you by the voucher provider when you first joined the scheme.

When you pay for some of your childcare with vouchers, it may take some time for your childcare provider to be paid by your employer or the voucher provider. Because of this, you may need to authorise payment before your childcare payment is due. Usually five working days is sufficient but this will depend on the particular voucher scheme. Contact your employer or the voucher provider for more information.

If you use electronic childcare vouchers, the scheme may allow you to authorise payment to the childcare provider on a monthly or other basis. You need to authorise this payment to make sure your childcare provider is paid. If you forget then your childcare provider may ask you to make up the shortfall in some other way.

Please note that if you have unused tax and NICs exempt childcare vouchers when you decide to leave a childcare provider scheme these will be treated as normal pay by your employer and will be subject to tax and NICs when you return them to your employer.

The above information is taken from the HMRC Paying for Childcare leaflet IR115