Parents
In April 2005 the Government introduced Tax Free Childcare vouchers, encouraging more employers to help their employees with their childcare costs.
Daisies Vouchers are a way of using this tax change to your advantage. They represent a genuine saving if you receive them as part of your salary.
The amount of Income Tax and National Insurance contributions you will save under the scheme depends upon your current salary.
How much can I save?
Each parent or legal guardian can receive childcare vouchers, which are non-taxable and exempt from National Insurance Contributions up to £55 per week (£243 per month).
If you are a basic rate taxpayer (22%), you could save up to £962 a year. A higher rate (40%) taxpayer could save up to £1,195 a year. This is based on your employer supplying you with vouchers to the maximum of £243 per month, and deducting the voucher amount from your gross pay before tax, in the form of a salary sacrifice.
Remember these vouchers can be claimed for both parents - so the savings above can be doubled for a family.
Please note that as with any taxation legislation, there is some small print, and each individual should check on their own personal circumstances (some ‘frequently asked questions’ are answered if you scroll down).
To find out how much you can save, use our online calculator, or contact Daisies Vouchers on 0207 291 9503 or info@daisiesvouchers.com
WHERE CAN I USE DAISIES VOUCHERS?
Parents can use Daisies Vouchers with virtually any childcare provider that is registered with Ofsted or the equivalent authority in Scotland, Wales and Northern Ireland. This includes registered Nurseries, Childminders, Play Schemes and Out of hours clubs. A full list of provider types is listed in the questions below.
The childcare vouchers received are exchanged, in whole or part, for the childcare services you use.
How does the scheme work?
The scheme is only available to employed individuals as all childcare voucher schemes must be operated through your employer.
The voucher scheme works by changing how your employer pays you, through an arrangement known as Salary Sacrifice. Salary Sacrifice is when you agree with your employer to give up the right to a portion of your cash pay in exchange for a non-cash benefit e.g. childcare vouchers.
So for any month in which you wish to receive childcare vouchers, you give up the right to receive your full cash pay by the agreed value of those childcare vouchers. The total value you receive however will remain the same.
By using salary sacrifice, the vouchers are paid for out of your salary before it is subject to income tax and National Insurance. Therefore by receiving vouchers you are saving income tax and National Insurance on the voucher part of your pay.
For more details, please refer to the ‘Frequently Asked Questions’ section below, or for more personal advice contact your Human Resources Department or Daisies Vouchers directly on 0207 291 9503.
Frequently Asked Questions
Outlined below are answers to some of the questions most frequently asked. However, more personal advice can be obtained by contacting us directly on 0207 291 9503. You may also wish to contact your Human Resources Department or Childcare Co-ordinator if appropriate.
1. What kind of childcare can Daisies Vouchers be used for?
Daisies Vouchers can be used to pay for many different types of childcare. However, all childcare providers who receive childcare vouchers as payment must be registered with Ofsted or with the equivalent authority for Scotland, Wales or Northern Ireland, or have approved status. Childcare vouchers cover children up to 16 years of age
Registered and approved childcare includes:
- Registered Nurseries, Childminders, and Play Schemes.
- Out of hours clubs on school premises run by a school/local authority.
- Childcare schemes run by school governing bodies under the ‘extended schools scheme’.
- Childcare schemes run by approved providers, for example an out-of-school hours scheme or a provider approved under a Government Department accreditation scheme.
- Childcare given in the child’s own home by a person*, including a domiciliary worker or nurse from a registered agency, approved to care for your child or children (England only).
- Childcare given in the child’s own home by (or introduced through) childcare agencies, including sitter services and nanny agencies, which must be registered (Scotland only).
- Approved foster childcare providers (note that care must be for a child who is not the foster childcare provider’s first foster child).
* Childcare provided in the child’s own home does not qualify if the person approved to give that childcare is a relative of the child.
Please note that it is your responsibility to inform Daisies Vouchers or your Employer of any changes to your childcare provider including changes to registration or approval status.
Approval of Childminders & Nannies
There is a new scheme for various forms of childcare not previously able to register officially, called the Childcare Approval Scheme. This enables childcare providers caring for a child in the child’s own home (such as nannies), or caring for children over 7 on other domestic premises (such as childminders) to become “approved” by showing that they have certain qualifications. The scheme is voluntary. For more information about the Childcare Approval Scheme, ring the helpline 0845 7678 111 or visit www.childcareapprovalscheme.co.uk.
2. Will all childcare providers accept childcare vouchers?
Most providers will accept vouchers. If you have any problems please contact Daisies Vouchers on 0207 291 9503 or info@daisiesvouchers.com and we will do our best to assist you.
3. Can childcare vouchers be used for any child?
In order to receive childcare vouchers you must be the parent or legal guardian of the child that is to be provided with childcare. This includes foster children and legally adopted children.
4. How much can I save by joining the scheme?
If you are a basic rate taxpayer (22%), you can save up to £962 a year. A higher rate (40%) taxpayer could save up to £1,195 a year. This is based on your employer supplying you vouchers to the maximum of £243 per month, and deducting the voucher amount from your gross pay before tax, in the form of a salary sacrifice. Both parents may qualify for these savings.
PLEASE NOTE:
A number of state benefits are dependent on a minimum level of National Insurance contribution being maintained (e.g. statuary sick pay and Job Seekers Allowance). The childcare voucher salary sacrifice arrangements may not be appropriate if the amount of pay that you would receive under the salary sacrifice arrangement means that your pay or income which is paid to you in cash, would be less than £5,036 per annum (£420 per month) 06/07 tax year.
If you earn around £5 per hour then you need to ensure you do not contravene the “minimum wage” rules. The salary sacrifice arrangement, under which you receive childcare vouchers as part of your total pay, reduces the amount of cash salary you receive.
As the minimum wage is calculated on this cash amount, the total value of the childcare vouchers you receive under the salary sacrifice arrangement cannot reduce your hourly rate below £5.05 per hour (the current National Minimum Wage). This means that if you work different hours each week or month, the amount of childcare vouchers you wish to receive should be reconsidered each week or month to ensure that the amount you are paid stays above the minimum wage.
Please contact your Human Resources Department or your Payroll Department for further details.
5. What is the maximum number of vouchers that I can receive each month?
Only the first £243 of vouchers a month will qualify for National Insurance and Income Tax exemption however you can arrange with your employer, if they agree, to receive childcare vouchers in excess £243 per month. Vouchers over the exempt amount will be fully taxed and subject to National Insurance.
6. How do I start receiving Daisies Vouchers?
You must complete an Employee Registration form. On the form you should put the date of the first pay day when you want the salary sacrifice arrangement to start. You should also put the date of the final pay day that you want salary sacrifice arrangement to cover.
This Employee Registration form is very important as it is a written agreement between you and your employer to change the way in which you are to be paid. You are agreeing that instead of an all cash salary payment, you will be paid partly in cash and partly in childcare vouchers.
Once we have received your form, we will contact your childcare provider to confirm that they are willing and eligible to receive childcare vouchers in payment/part payment for their services. Once we have received this confirmation your employer will start deductions from your salary and payments to your childcare provider can begin.
7. If I join the scheme, do I have to be paid partly in vouchers every month?
If your employer agrees, you can vary the extent to which you receive childcare vouchers, however you will need to complete an alteration form each time you change the amount of vouchers you wish to receive. For this reason, it is practical to change voucher amounts on a weekly basis.
8. When and how are payments made to my Childcare Provider?
Your employer will make the salary sacrifice deduction from your gross pay on your usual payday, once a month. We will then collect payment from your employer, by Direct Debit, on the last day of each month.
Once the funds from your employer are received, cleared and processed we will then make payment by BACs (unless otherwise requested) to your childcare provider on the 15th of each month.
Most clients find that this payment will form part of their childcare fees due at the end of that month. To clarify, if your first salary deduction is made at the end of January, the first payment will be made to your childcare provider on the 15th of February, and will go towards the advance fees due at the end of February for March’s childcare.
The majority of our schemes are run entirely electronically and we make direct payment to your childcare provider by BACs payment. As such you will not actually receive any paper vouchers nor is there any ongoing monthly paperwork to complete.
9. Does my childcare provider have to register with Daisies Vouchers?
Yes, we are required to check that each childcare provider is a registered childcare provider with Ofsted (or the equivalent for Scotland, Wales or Northern Ireland, or has approved status) and they also will need to send us a copy of their registration/approval certificate.
In addition, we need to have your childcare provider’s bank details so that we can pay them. Childcare providers are paid by BACS transfer direct into their bank account.
We will contact your childcare provider directly for all of the above requirements.
10. Does it cost my childcare provider anything to register with Daisies Vouchers?
No, Daisies Vouchers will cover the cost of postage for all childcare providers who accept our vouchers.
11. If I join the scheme, do I have to change anything with my childcare provider?
The only thing you have to do is to advise your childcare provider that you will be paying (or part paying) for your childcare using Daisies Vouchers. Of course, you also need to reduce your usual personal payments to the nursery.
12. Can I receive Daisies Vouchers for more than one child?
Yes, and you can also have payment made to more than one childcare provider. This is particularly useful if you have more than one child and use different childcare providers. However, the total monthly tax exempt voucher amount you can receive is limited to £243 per month regardless of the number of children.
If you do use different childcare providers your must list each childcare provider separately on your Employee Registration form. Each childcare provider must be registered with Daisies Vouchers.
13. What do I do if I want to leave the scheme, E.g. If my child leaves nursery?
If you have agreed to sacrifice your salary for a period that is longer than one month, please contact your payroll department or Daisies Vouchers informing them that you wish to change the arrangements.
14. What should I do if I am planning to take some Maternity Leave?
If you are pregnant and are planning to take maternity leave you should think carefully about whether you should join the scheme during this period.
By entering into a salary sacrifice arrangement, you will reduce the amount of salary that is liable to National Insurance contributions. Therefore, any salary sacrifice entered into during the eight week Statutory Maternity Pay (SMP) calculation period will reduce your entitlement to SMP.
If you join the scheme and then become pregnant you should contact your payroll department or Daisies Vouchers immediately so that you fully understand the implications.
If you are currently receiving SMP or maternity pay, you should contact your Human Resources Department to find out whether you are receiving sufficient income to enter into a salary sacrifice arrangement. You also need to consider any other financial commitments which are deducted at source whilst you are on maternity leave.
15. What should I do if I am planning to take some Paternity Leave?
As with Maternity Provision, if you plan to take some paternity leave or are currently receiving Statutory Paternity Pay you should establish whether you should join the scheme during this period, (please contact your Human Resources Department for further details).
16. Will receiving childcare vouchers affect my pension?
Although we are able to discuss this with you, you should contact your company’s pension adviser for more information and advice.
With regard to your state pension, as long as you pay the minimum requirement for National Insurance contributions, vouchers should not affect your basic State Pension, however, it may have a small effect on your Second State Pension. For further information please contact your pension adviser or local tax office.
17. What happens if I am entitled or may be entitled to Working Tax Credit (WTC) or Child Tax Credit (CTC)?
The Child Tax Credit (CTC) offers financial support with general family costs. Working Tax Credit (WTC) supports individuals on lower incomes, where working parents may be eligible for additional help towards (registered) childcare costs.
The amount of credit you receive depends on a number of factors including income, size of family and amount paid in childcare. The receipt of childcare vouchers through a salary sacrifice scheme can affect your entitlement to these tax credits as follows:
Where your average earnings have effectively been reduced, you could receive a higher payment through the WTC. However, the value received in childcare vouchers from an employer cannot be considered as childcare costs when calculations are made for your entitlement to the childcare element of WTC (this would be claiming twice for the same benefit). The childcare element of WTC may therefore be reduced.
It is advisable for you to find out what level of support you could be entitled to through the CTC and WTC before you sign up to a Daisies Vouchers scheme. In some instances you may be financially better off opting to receive help through the WTC rather than through your employers childcare voucher scheme.
You should check out your own situation carefully before deciding which benefit is better.
The following points provide an outline guide as to whether you would get more help from Tax Credits, or from childcare vouchers, but individual advice must be sought:
- You will always benefit from a tax and NICs free childcare voucher scheme if it is offered on top of your existing salary.
You will generally be better off accepting childcare vouchers in return for a salary sacrifice if you can answer “yes” to one or more of the following:
- Your eligible childcare costs are more than £175 per week if you have one child or £300 per week if you have two or more children. In this case you will always be better off accepting childcare vouchers to cover your childcare costs above these limits.
- You are receiving tax credits at the family element (£545 per year, or £1090 per year if you have a baby aged under one) or less and you are claiming for their childcare costs.
- You pay tax on your earnings at the higher rate of 40%.
You will generally be worse off or, at best, no better off accepting childcare vouchers in return for a salary sacrifice if you can answer “yes” to all of the following:
- You are receiving tax credits of more than £545 per year (or £1090 per year if you have a baby aged under one) and you are claiming for your childcare costs.
- You do not pay tax on your earnings at the higher rate of 40%.
- Your eligible childcare costs are no more than £175 per week if you have one child or £300 per week if you have two or more children.
For more information on Child Tax Credit and Working Tax Credit contact the Tax Credit Helpline on 0845 300 3900 or visit www.hmrc.gov.uk/childcare/taxcredits-guidance.htm.
18. Do I have to use Daisies Day Nurseries to make these savings?
No, Daisies Vouchers are redeemable with any registered/approved childcare provider. Your child does not have to attend a Daisies nursery to use them, however if you do use Daisies Vouchers, a discount is offered on the place by Daisies Day Nurseries.
19. How do I join the scheme?
Your employer has to agree to the scheme. Please provide us with details of the person to speak to and we will contact them on your behalf. For you to then join the scheme you must complete an Employee Registration Form and sign the agreement to vary your Terms and Conditions of Employment. This enables your employer to provide you with childcare vouchers as part of your salary.
20. Who should I contact if I want to know more about the scheme?
Call Daisies Vouchers direct on 0207 291 9503 or e-mail info@daisies vouchers.com.