Put simply, you buy childcare vouchers from your pre-taxed income. That means you don’t pay tax or National Insurance on them.
You can spend your childcare vouchers on almost any Ofsted registered or approved childcare for children aged 0-15 years (16 if your child is registered disabled). This includes nursery, nanny, childminder, playgroup, even after-school and holiday clubs.
By paying in childcare vouchers, you avoid being taxed for some of the money you spend on childcare – up to a limit of £55 per week per working parent.
That adds up to £243 a month per parent, totalling a maximum possible annual saving of £1195.56.
How to get childcare vouchers?
You have to purchase them via your employer, so find out whether your company belongs to a childcare voucher scheme. Ask your HR or personnel department for information.
Vouchers are not specific to an individual child and have a long expiry date, so even if you don’t need them right now, it might be worth stocking up on them for the future.
For example, if you are on maternity leave, your partner could be purchasing vouchers in advance to cover the time when you use childcare on your return to work.
You cannot, however, start buying childcare vouchers before your baby is born.
And do note, too, that purchasing childcare vouchers could have an impact on any childcare tax credits you receive, so check this out here.