Childcare vouchers - how do they work?

[PaulStat]

Hi Guys,

I'm trying figure out how much "better off" I'll be if I forfeit part of my salary on childcare vouchers. The way I understand it is that you can forfeit up to a certain amount of your monthly salary that isn't taxed and goes towards paying for childcare?

So for example if usually I were to receive £1600 a month after tax, national insurance etc? Would I actually get a little bit more because part of my salary isn't being taxed? Gahhh not really understanding it!

I've figured out how much I will have left over per month with paying for the nursery fees, but at the moment it doesn't take into account the tax free part if you see what I mean? Hard to put into words!

Anyone with some experience in using them able to provide the info?

Cheers,
Paul

 

[rpstewart]

So for example if usually I were to receive £1600 a month after tax, national insurance etc? Would I actually get a little bit more because part of my salary isn't being taxed? Gahhh not really understanding it!

You'll end up seeing less as a bottom line figure because the value of the vouchers will be deducted from the top line.

It's easier to work out based on your pre-tax earnings rather than after tax. If you're pre-tax salary is £2000 per month and you elect to take say £250 worth of vouchers then you'll get £250 worth of vouchers in your hand but your taxable salary becomes £1750 per month.

 

[{SAS}TB]

If you take the full £243 monthly allowance you can (depending on your tax code and level of earnings) save upto around £100 month / £1200 a year.

The government recently had a proposal to scrap the scheme overturned but still (IIRC) intend to reduce the savings for higher earners (***ks)

 

[PaulStat]

Are student loan contributions taxed?

 

[{SAS}TB]

Are student loan contributions taxed?

I belive (but not 100%) that they are and you then claim them back through your tax return

This is only cos ive seen Student loan payments on tax return forms

 

[PaulStat]

I'm a bit confused then as I've calculated my income tax payments to be 17%, shouldn't it be 20%?

 

[platypus]

You hand in your vouchers at the nearest Citizen Welfare centre, and then get given a child to care for.


No, wait..

 

[D1ngd0ng]

I'm a bit confused then as I've calculated my income tax payments to be 17%, shouldn't it be 20%?

You forgot the first 6k(?) of what you earn is 'tax free' hence the lower than expected for amount

 

[Vonhelmet]

It's worth looking into whether you're better off claiming some of the costs back via tax credits, or getting the vouchers.

Tax is complicated, yo.