What are childcare vouchers?

Childcare vouchers can help you to save money with your childcare fees. They are a way of paying for childcare – through your employer. The first £50 a week supplied via childcare vouchers is exempt from tax and National Insurance Contributions (NIC) for employees.

How does the scheme work?

If your employer runs a scheme, this will normally be run through a childcare voucher company. The voucher company will either send your childcare vouchers directly to you, or they will provide your employer with them to distribute accordingly. Once you’ve received them you can use them to ‘pay’ your childcare fees. Rainbow will then redeem the value of the voucher from the childcare company.

How do childcare vouchers save me money?

To be exempt from tax and National Insurance contributions (NIC) you can sacrifice up to £50 per week (£217 a month) of your salary. You will then receive that amount in childcare vouchers. This means you will only pay tax and NIC on the reduced level of your salary, which effectively saves money on childcare costs. An average tax payer could save over £1.000 a year. Each employed parent can claim the exemptions, so a two parent family could save up to £2.000.

How do I apply for childcare vouchers?

If your employer is taking part in the scheme, you need to formally (by a change in your contract) agree to a reduction in your salary and instead receive that amount in childcare vouchers. Your contract between you and your employer will need to be updated or a signed agreement included within in it reflecting the salary sacrifice agreement. This should make clear the reduction in salary you have agreed to, the time length of the agreement and the amount you will receive in vouchers.

Sign up for childcare vouchers you now know why it makes sense.