Generally, if you are a high earner you will be better off accepting employer-supported childcare support, such as childcare vouchers, as you will make the greatest savings on tax and National Insurance Contributions, especially if you are paying higher childcare costs. However, you should seek independent advice before making a decision to ensure that you are not losing out.
Although it may be possible for you to claim both the childcare element of Working Tax Credit and employer-supported childcare at the same time, you will generally not be able to benefit from both systems to help with your childcare costs, as any amounts will be included in any calculations done and will reduce the amount you are eligible to receive.
The following information provides a very general guide to whether you would get more help from tax credits, or whether employer-supported childcare would be more beneficial to you. However, you should also make sure that you check your individual situation carefully before you make a decision.
- You will usually benefit from using employer-supported childcare that is exempt from tax and National Insurance Contributions if it is offered on top of your salary.
- Generally, if you are getting less than £545 a year in total from tax credits, you will be better off using employer-supported childcare.
- Generally, if you are getting more than £545 a year in total from tax credits, you will not gain from claiming the tax and National Insurance Contributions exemptions - unless you are a higher rate tax payer.
- Generally, if your childcare costs are more than £175 per week for 1 child or £300 per week for 2 or more children, you will benefit from taking childcare vouchers to pay for the amount that your childcare costs exceed those limits.
Further information about this is available in our factsheets. For more information about Working Tax Credit contact the Tax Credit Helpline on 0845 300 3900 or visit www.hmrc.gov.uk/childcare.
HM Revenue and Customs have created a tool, called the Childcare Indicator, to help you decide whether you would be better off receiving tax credits or taking childcare vouchers from your employer to help you with your childcare costs. This calculator is available on their website: www.hmrc.gov.uk/childcare.