Contractor Eligibility for Childcare Vouchers
Subject to meeting HMRC’s eligibility criteria, contractors with children can offset the cost of childcare against their personal and corporation tax liabilities.
This could mean a saving of up to £2,392 pa for some contractors.
Childcare vouchers are non-taxable and exempt from employees NIC’s and can save employers’ NIC’s also. This makes it a valuable tax break and one worth taking advantage of for contractors with families.
Employers can give their employees childcare vouchers up to the value of £55 per week free from PAYE contributions, if they satisfy the above eligibility criteria.
In real terms, for every £100 a basic rate tax payer pays from their salary, they receive roughly £130 in Childcare vouchers.
The allowance does not depend on the number of children in the household, and is per parent, therefore two working parents could qualify for £486 per month, or a total saving of £2,392 per year.
It should be noted however, that payments above £55 per week will be subject to income tax and NICs, and will also be treated as a benefit in kind.