Childcare vouchers
Childcare vouchers can help you to pay for your childcare and are one of the ways that your employer can help to support you. The first £55 per week (£243 per month)*, provided through childcare vouchers is exempt from tax and National Insurance Contributions, so they can help you to save money with your childcare fees as long as all the qualifying conditions are met.
Based on the exemption amount of £55 per week, each employed parent can claim the exemptions, meaning a 2 parent family could save up to £1,808 (if both are in the basic rate tax bracket) or up to £2,390 (if both are in the higher rate tax bracket). The exact amount that you can save depends on individual circumstances.
Employers can choose whether they run a scheme with the help of a childcare voucher company, or run it themselves. If your employer uses a company to run the scheme, they will either supply you directly with your childcare vouchers or will provide your employer with them, which they will then distribute to you.
You can use your childcare vouchers to 'pay' for registered or approved childcare. The childcare provider will then cash in the value of the voucher from the childcare voucher company (or your employer, if they are running the scheme themselves).
You can receive any amount in childcare vouchers from your employer, but only the first £55 per week (£243 per month) is free from tax and National Insurance Contributions.
Directly-contracted childcare
Employer-contracted childcare is when your employer has a direct contract with your childcare provider and pays for some or all of your childcare. The exemptions are the same as with vouchers. This arrangement may suit smaller employers that do not want to use a childcare voucher scheme.
Workplace childcare
Some employers provide workplace or in-house childcare provision on their own premises. If your employer provides a workplace nursery or holiday playscheme (and they are wholly or partly responsible for financing and managing the provision) all of your costs for sending your child there are exempt from tax and National Insurance Contributions, not just the first £55 per week (£243 per month). You are also able to claim childcare vouchers or directly-contracted childcare or a combination of the two (up to the value of £55 per week) on top of the workplace childcare exemption.
Further information about this is available in our factsheets.