From 6th April 2006, childcare vouchers or payments direct to nursery (up to a limit of £55 per week, or £243 a month) are exempt from tax and national insurance contributions. You will only pay tax and national insurance on the reduced level of your salary. This effectively saves you money on childcare costs. For a 22% tax payer this is approximate £962.28 per year, and for40% tax payers this is £1195.56. Remember this allowance is per person, so effectively you could save double.
Your employer will normally run a scheme with the help of a childcare voucher company and will pay that company an administration fee for their service. The voucher company will either supply you directly with your childcare vouchers or they will provide your employer with them, which they will distribute to staff accordingly. Your standing order is amended for a lesser amount and on receipt each month you use your childcare vouchers to ‘pay’ nursery. Nursery, then redeem the value of the voucher direct from the childcare voucher company, by direct payment.
We are registered with a large amount of childcare voucher companies, however if your employer is using a different company please speak to the office and we will take the relevant details from you so that we can also register with them.