If you are a higher rate taxpayer next tax year (earning more than £42,475 gross per year) the rules for exemptions within Childcare Voucher schemes are changing for you.
If you have not joined an approved Childcare Voucher Scheme with your employer or a third party yet, you should hurry to join before the end of this tax year (5th April).
Within the current tax year, 2010-2011, everyone is entitled to a tax and NIC free exemption from the first £55 per week (or £243 a month) of salary spent on Childcare Vouchers by their employer within an approved salary sacrifice scheme.
From 2011-2012 however, higher rate taxpayers will be restricted to £28 per week, and top rate taxpayers (those earning over £150000) will be restricted to £22 per week of tax relief.
This results in the following tax differences:
- A higher rate taxpayer will pay an additional £602 a year in tax/nics, and your employer will pay an additional £197 per year in Employers NICs.
- A top rate taxpayer will pay an additional £910 a year in tax/nics, and your employer will pay an additional £241 per year in Employers NICs.
We have incorporated a Childcare Voucher Salary Sacrifice option within our Tax Calculator
for you to experiment with. It includes the next tax year 2011-2012 and goes all the way back to 2003.