Backdating Childcare Vouchers to make even more savings
Childcare Voucher savings are based on an annual entitlement, usually spread over monthly salary sacrifice payments of up to a maximum of £243 each month (for basic rate taxpayers). Some employers allow staff who are not set to reach their annual entitlement to sacrifice more of their salary, tax and National Insurance-free, before the end of the tax year (5 April 2023), in order to reach their annual entitlement.
What does backdating Childcare Vouchers mean?
Backdating allows parents to retrospectively claim their full entitlement to Childcare Vouchers if they have been salary sacrificing less than their full allowance per month throughout the year.
Claire is a basic rate taxpayer who is allowed to sacrifice up to £243 per month, that’s up to £2,916 in the year ending 5 April 2023. Claire has been sacrificing £200 per month from April 2022 to January 2023 (totalling £2,000) so she can (if her employer allows), sacrifice an additional £516 (£43 x 12 months) spread over the remaining two months of this tax year in addition to her £200 regular monthly sacrifice. This would save her an additional £165 on her childcare.
If your employer allows you to backdate your Childcare Vouchers then your remaining salary deductions for the tax year will need to be increased through your payroll.
It’s important you speak to your employer now to find out if you can backdate your Childcare Vouchers for 2022/23 and, if so, what the process is as it could take some time to process your request.
- Backdating is at the discretion of your employer – some employers do not permit employees to backdate Childcare Vouchers.
- We recommend your salary does not drop below £1,291 per month once all deductions have been made – including Childcare Vouchers – otherwise you may not be making any savings on your income tax or National Insurance Contributions.
Depending on the length of the eligible period:
- Basic rate tax payers can sacrifice a maximum of £2,916 in the 2022/23 tax year.
- Higher rate tax payers can sacrifice a maximum of £1,488 in the 2022/23 tax year.
- Additional rate tax payers can sacrifice a maximum of £1,320 in the 2022/23 tax year.
Manage your Childcare Voucher account carefully
While we encourage parents to ensure they are getting the maximum savings through the Childcare Voucher scheme, we also remind them that they should not build up a balance of Childcare Vouchers if they don’t anticipate needing them to pay for registered childcare.
Remember a Childcare Voucher account is not a bank or savings account – once you have sacrificed your salary through payroll, the money becomes Childcare Vouchers – it is no longer ‘salary’ or ‘cash’ and HMRC rules are clear that Childcare Vouchers can only be used to pay for registered childcare.
If you have any questions about backdating, or Childcare Vouchers more generally, call our customer service team on 028 9267 8200.