Childcare vouchers and tax credits
Childcare Vouchers can affect entitlements to existing Tax Credits
Child Tax Credit
If you are receiving the Child Tax Credit you and your partner are still eligible for Childcare Vouchers. Your Child Tax Credit will not be affected.
Working Tax Credit
If you are eligible for the Working Tax Credit (but not the childcare element of this) you are still eligible for Childcare Vouchers. However when claiming Working Tax Credit and Childcare Vouchers you need to ensure that your salary does not fall below the minimum wage threshold.
Childcare Element of Working Tax Credit
If you are eligible for the Childcare Element of the Working Tax Credit you could be receiving up to 80% of your registered childcare costs per week (up to £140 per week for one child or £240 for two or more children). This could be more beneficial to you than childcare vouchers.
As a very general rule of thumb, if you are receiving more than £16 - £23 per week (this being the maximum amount you can save with Childcare Vouchers) towards your childcare costs through the childcare element of Working Tax Credit it should be more beneficial for you to claim the Childcare Element of Working Tax Credits.
Please note this is just an approximation as individual circumstances vary. To check which scheme you would be better off with, simply compare the award you currently receive from the Childcare Element of the Working Tax Credit with that of what you could potentially save with Childcare Vouchers.
HMRC provide guidance with this along with a Childcare Indicator Calculator which will give you a better-off comparison.
For further information please contact:
HMRC Helpline: 0845 603 2000 or
www.hmrc.gov.uk/calcs/ccin.htm
HM Revenue & Customs Childcare Indicator -helps you choose if you are better off with tax credits or childcare vouchers For more information on tax credits versus childcare vouchers call the HMRC Tax Credits Helpline on 0845 300 3900 or visit www.hmrc.gov.uk and click on tax credits or call Employers For Childcare on 0800 028 3008.
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