Childcare Vouchers

When parents come for showrounds at nursery, we are often asked if we can explain the Childcare Voucher scheme. Many large employers offer these vouchers and they can help you save £933 a year so they are well worth looking into.

However, like most such schemes, they can appear very complicated so here’s our attempt to simplify things:


What are Childcare Vouchers?

It is a scheme run by the government through your employer, which enables you to pay some or all of your childcare costs BEFORE you pay any tax or national insurance. This means that your tax and national insurance payments will be less.


How much are the vouchers worth?

Basic rate tax payers can pay for up to £243 of childcare with vouchers each month. Each parent is eligible, so if there are two of you, you could use £486 a month of vouchers between you. This amount stays the same regardless of how many children you have in childcare ie £243 in total.
From 6 Apr 2011 new joiners paying higher or top rate tax had their allowance dropped so that all tax payers have roughly the same maximum tax gain. The limits are currently:

  • Basic Taxpayer. £243/week vouchers, max annual gain £933.
  • Higher Taxpayer. £124/week voucher, max annual gain £623.
  • Additional Taxpayer. £97/week voucher, max annual gain £606.


How do you get vouchers?

Your employer must opt to offer this scheme, so check with your HR department or manager. Frequently, your employer will opt to administer the scheme through an external voucher company, so your employer should give you some forms to register with that company. This is where is gets a bit complicated, because the voucher company will also need to check that the nursery are registered with themselves (give them the nursery Ofsted number beginning with EY……) and send the nursery some more forms if they aren’t.)


How is the money paid?

After all the forms have changed hands and everyone is signed up, the money will usually be taken out of your pay before it even reaches your account and paid directly to the nursery in the form of an e-voucher. Some voucher companies require you to make an online transfer. A remittance advice is usually emailed to your nursery, so that they can match up the payments to your account. The whole process can take a few weeks to sort out, so you will need to pay your nursery in an alternative way until you are sure the first payment has gone through.


Any downsides?

The scheme means that you are physically earning less and that can mean that you reduce your entitlement to some benefits and tax credits. This government website helps you to work out if it is worth it, financially:


What if your childcare costs are more than £243 a month?

You can still use the scheme – just ‘top up’ the voucher using alternative means (usually a standing order).


Need more information?

Arrange a showround by calling us on 01933 276795 and we’ll do our best to explain further. Your payroll department should also be able to help.

Childcare Vouchers