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Discussion Starter · #1 ·
Hi

As the topic title says, i have found out my employer does participate in the childcare voucher scheme (salary sacrifice) and it does sound like a good idea, but can anyone enlighten me as to how it works, weather it effects tax credits etc

Thanks
Channy xx
 

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Hi,

Ask you Employer for an information pack as that should contain full details for you. Also, have a read of this link - it's the bloke who talks about money on gmtv

http://www.moneysavingexpert.com/health/childcare-vouchers

One important thing to look into is your current pension arrangements if you are paying in to one as salary sacrifice can affect this depending on your tax status and they type of pension scheme you have

Hope that helps

S xxxx

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Hi

In a very basic format... you take a pay cut - smaller salary = you pay less tax/NI, but your employer pays some of your childcare.

*An 'agent' will act as a go-between between your HR/Payroll dept and your childcare provider - it's generally very easy to set up.
*The childcare provider must be registered - but this is simply an OFSTED number, so if they've have an OFSTED report, they're registered.
*You can pick any amount up to £243 (I think) to be taken out of your pay to pay for your childcare (via the agent). The childcare provider is paid directly so all you need to sort out is the extra money you may owe them.
*This amount will be taken out of your salary before you pay any tax/NI etc - so you are saving by not paying tax on the nominated amount. By taking the full £243 sacrifice, you save approx £1000 by not paying tax and NI. :)
*On your payslip it will appear as though you have taken a paycut - although this simply is the wage you ARE paying tax on.
*It does affect your Tax Credits, although I'm not sure how, I've yet to have to deal with the renewal since doing the salary sacrifice. I think they'll work your tax credits out on the amount of your 'true' salary, not the one that will appear on your wage slip.
*Only one salary can be sacrificed per child.

Hope I haven't confused you even more. ^idiot^

Claire
x
 

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Claire,
Sorry to contrdict a little ;) :-[

clairelb said:
In a very basic format... you take a pay cut - smaller salary = you pay less tax/NI, but your employer pays some of your childcare.
This is not the case, in the majority of cases, and definately not in the cases of salary sacrifice for childcare vouchers.
The savings made by the employer are through the fact that they don't have to pay NI contributions on your notional (higher/pre deductions) salary.
My employer certainly doesn't pay any of my childcare costs but they do get benefit through not having to pay NI contributions on the amount of money I sacrifice each month for childcare vouchers. Claire, you are correct that the current maximum is £243 per month (£2,916 per year!)
The employer may "fund" the administration of the scheme but they definately don't pay for your childcare (that's a different benefit).

clairelb said:
*You can pick any amount up to £243 (I think) to be taken out of your pay to pay for your childcare (via the agent). The childcare provider is paid directly so all you need to sort out is the extra money you may owe them.
Strictly speaking, in some cases (with some agents) this is not true. My agent holds my "vouchers" in an account that I have control of. I decide each month who to send the money to electronically.
There are two main benefits of this.
Firstly, you can have more than one childcare provider.
Secondly, your childcare cost may fluctuate from month to month - but at the beginning of each tax year you need to decide on a fixed amount that you want to scarifice each month. My agent, holds the "vouchers" in my account and they accumulate.
A very very simple example of this would be if your childcare provider was on holiday for a month and you didn't have to pay them that month, the amount you have sacrificed can be held in your account to help pay for future months.

clairelb said:
*Only one salary can be sacrificed per child.
This isn't correct.
Only one sacrifice up to the maximum of £243 per month can be made by each "tax/ni payer" - regardless of the number of children that you individually or a couple have.
When DH and I only had F, we could both sacrifice £243 per month. Now we have E too, we can still only sacrifice £243 per month.
The benefit is available for the "tax payer" as opposed for the child/children.

Sorry again to contadict .. it is yet another minefield! ;)

Dee
xxx
 

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Dee

I guess what I meant by saying 'Your employer pays your childcare' is that by taking the 'cut' in salary, the amount that I am sacrificing is paid via my employer to the agent.  I don't have to take the amount out of my salary myself via any direct debit, my employer does that for me.

Sorry to confuse.  :-[

Claire
 

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Hey Claire,

No worries, hun.

Just didn't want anyone to think that we were all blessed with a nation of caring and generous employers that would pay our childcare fees for us! ^roflmao^

Am sure that there are probably some (well maybe a couple of !) gooduns like that out there ... but they are certainly not in the majority!  :-\

Dee
xxx
 
G

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Channy,

The people you need to speak to are Accor Services who will advise you accordingly...

hope that helps

:-*

Just need to add that the opinions expressed on this thread are personal opinions and not ff opinions
sorry boring i know but just have to say it
 

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Here is the link to the Inland Revenue leaflet on childcare vouchers etc http://www.hmrc.gov.uk/leaflets/ir115.pdf

Accor are only one of the intermediaries - KidsUnlimited and BusyBees also are and plenty of others. Each of them has slightly different ways of handling payments to childcare providers so you need to talk to the one your employer uses.

Betty

/links
 

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We've just been looking into it and DP has just brought home his (and my former) employer's info on the scheme.  They use Sodexho as an intermediary.
I don't know if this is common to all or whether just what his employer does, but he has to sign up to a minimum 12 month contract. 
As we don't spend as much as £243 a month on childcare at the moment, but don't know what we will be doing in a year's time, we're debating how much to sacrifice and whether to build up a pot of vouchers - as you can still redeem them up to a year later - so that if we increase the amount of childcare we use, we can still use vouchers.  OTOH, if we don't, will we have bought too many vouchers?

Sorry if this sounds garbled, I'm finding it a bit complicated myself!

Claire x
 

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Hi channy

i did the salary sacrifice with Hollie (and I work for the NHS like you) as I wasn't entitled to the childcare tax credit because our salary was too high and the nursery fees were too low.   Salary sacrifice - based on nursery fees of £286 a month (just two days a week) it actually cost me £186 so a saving of £100 a month and this will be taken out of your pay each month.   I thought it was worth it as a short term measure.  The salary sacrifice system is organised by the NHS themselves so there isn't a third party involved (like if you use the vouchers say) so I had a meeting with our Employee Care Services and went through the forms with us.     The other alternative for us was the Busy Bees childcare vouchers which our nursery also accepted but for us the saving wasn't as great.
Salary sacrifice and childcare vouchers are two separate schemes.   With salary sacrifice you don't build up vouchers etc..

Now though the childcare tax credit will work better for me as my nursery fees will be more substantial and Im now eligible.   I couldn't save that much through salary sacrifice as the higher fees would take my wage below the minimum wage and that isn't allowed.    Have you done the calculation on the tax credit website to see if you are eligible for the childcare tax credit you can then weigh it all up.

It is a real minefield trying to work out the best way as you can only do either salary sacrifice/childcare vouchers or childcare tax credit you can't do both.

Lou xx
 

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Hi
Debating whether to get involved here as I do a lot of work with company's telling them about salary sacrifice so wonder if I'll go too far and confuse everyone even more!!

Anyway - here goes.

When an employee starts taking part in a salary sacrifice scheme, then they are agreeing to a change in their terms and conditions such that their income is reduced.  On the other hand, their employer agrees that they will provide a benefit to them instead (this is usually something that they can give out tax or NIC free so that they and the employee both benefit).  Therefore in order to save themselves and their employees cash, lots of employers will offer their employees childcare vouchers via salary sacrifice.  So I agree that salary sacrifice is not the same thing as childcare vouchers, but would also say that they are usually connected.  And Lou - many childcare vouchers offered via salary sacrifice schemes (such as the one I am part of) do allow you to save up vouchers in an account.  It's just that the employer will usually bear any admin costs that if you go directly via someone like BusyBees you would have to fund yourself.

So ClaireLB you are right in what you said although maybe its just because I see this everyday that I knew what you meant!!! 

If you are paying higher rate tax and use any form of registered childcare you would be mad not to do this - the savings are huge.  If 1 parent is a higher rate taxpayer then they can get £243 of vouchers tax and NIC free each month (i.e. instead of getting £243 in cash which would be taxed and NIC-ed to give them about £143 net, they get £243 of vouchers - so its an extra £100 a month).

If you are a basic rate payer who is not eligible to get child tax credits then its also well worth doing although the savings aren't quite as much.

If, however, you get child tax credits, then it all gets very complicated - basically the amount of "qualifying childcare" costs in the tax credit calculation are affected and it can mean that you will actually be worse off. 

Also - while it might be financially detrimental, you can in theory do salary sacrifice and child tax credits - a good employer will try to identify people who are vunerable to being worse off but there is no guarantee of that happening.  So do check things out before you sign up to something that you keep being told is a good thing.

Claire (ceedubya) - When an employee does salary sacrifice they should sign up to it for 12 months (this is an HM Revenue & Customs requirement).  Some of the schemes such as BusyBees let you dip in and out and change the amounts - at the moment HMRC seem to be turning a blind eye to this (maybe the government knows what would happen if they started clamping down on this?).  But really your husband's employer is doing it properly.  The way I get my vouchers though is that each month they go into an Accor "account" so they can build up and up and you certainly don't waste them if you don't use them for a month (my DH is a teacher so we'd be stuffed if that was the case).

Confused?  I certainly am....

Tams x
 

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Tams - thanks for all that info.   It is good to hear from somebody in the know :)   I tend to muddle through and completely agree it is confusing.   We get charged for our nursery place whether we use it all the time or not?   Is that not the case with your childcare (sorry just curious here).   

Our salary sacrifice scheme is just for our NHS Trust nurseries, sorry should have said that.  I am pretty certain that you can't save up vouchers though like on the Busy Bees though.  Im probably being completely dense here but I can't see it would be of any benefit for me for example to save up vouchers when she goes to a nursery that charges us regardless of whether we're on holiday or my little one is sick for example.  Our nursery has a waiting list so I don't think they would let us dip in and out as they would lose the income for a place that somebody else could use.  Our scheme claim on their literature it is possible to reduce your childcare costs by up to 45% depending on your personal circumstances.

They do run also a childcare voucher scheme for any registered childcare, which they use Busy Bees to administer the scheme.

I am confused though as to why it affects the childcare element of tax credit though, why does it make you worse off if you do salary sacrifice?   

xx   
 

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Sorry you probably really regret posting now ;D
 

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I use one run through Sodexo and I have to say its great. Much quicker and simpler than going to the cashpoint and getting the money out!! x
 

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We have just signed up and got our childminder to fill in the forms for Sodexho.  Our biggest problem has still been to work out how much money to sacrifice per month, given that Matthew will be getting his free place at nursery from next January.
We found out from DP's employer that even if you don't use your 'vouchers' or accrued money after a year, it can be reissued. 

Claire x
 

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Discussion Starter · #16 ·
Thanks so much for all your replies, you girls really are amazing, as it happens i can't use the voucher system as it would take my wage to under minimum wage  ::)  But i hope this thread will be useful to anybody else thinking about using them

Thanks again
Channy xx
 

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I'm confused about the tax credit thing (I use Kids Unlimited) I thought that the tax credits people would be informed of your reduced wage therefore you COULD be better off due to reduced earnings?!  Blimey I thought i'd got my head round this and now....?!
 
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