Contractor Childcare Vouchers vs Tax-Free Childcare It is not easy balancing contracting work with childcare. You may either cut back on the job by looking after your kids or lose some of your earnings paying outfor childcare. Childcare vouchers offer a practical solution,giving people tax relief on the money they set towards childcare. However, from October 2018they will no more be available to new applicants. Instead,individuals can claim throughout the Tax-Free Childcare scheme. {So,how does it work? |} Can contractors claim? And what’s the best option for you? {Continue Reading to getwww.whichumbrellacompanies.com manual to contractor childcare vouchers and tax-free childcare.|} Which are childcare vouchers? The Childcare Voucher scheme allows employees to take some of their salary as childcare vouchers,rather than money directly in their bank account. Why? By doing so,this component of the commission is exempt from tax and national insurance. Employees may take up to #55 per week of the salary as childcare vouchers. This can be utilized to cover approved childcarecosts,such as: Registered childminders,nurseries or nightclubs Childminders via an Ofsted-registered service A registered school A care worker through a documented home care service Depending upon the specific strategy,these vouchers may also be utilized on childcare assistance supplied by your employer — such as an on-site personnel nursery. Obviously,these coupons can only be used for your ownchild or stepchild who resides with you. £55 a week figures to £243 per month and more than £2,800 within the course of a year. {Contemplating exemptions for both tax (20%) and national insurance (13.8%),that provides a net benefit of over £1,000 for basic rate tax payers.|} The amount you can claim is decreased slightly for higher and extra rate taxpayers: { Greater speed: £28 weekly,£124 per month and £1484 per year Additional rate: £22 weekly,£97 per month and £1166 per year Contractor childcare vouchers |} Since they’re not classed as an employee,self-employed contractors can’t claim childcare vouchers. There are ways for contractors to acquire the advantages of tax-free childcarevouchers,nevertheless. {Primarily,through their own limited company. |} Contractors operating as a limited company may pay childcare providers right,which will reduce their corporation tax bill. On the other hand,the easiest way is by way of a contracting umbrella. Since they add contractors as an employee,you also can get the benefits of childcare vouchers without a extra admin on your part. The value of childcare vouchers is only subtracted from your wage before it is processed via pay-as-you-earn tax. Things are changing From 4th October 2018,new applicants can no longer combine childcare voucher schemes. People already enrolled on a childcare vouchers scheme can still continue to use it as long as they remain with the same employer and the employer continues to run the strategy. Rather than childcare vouchers,new applications willneed to go via Tax-Free Childcare to acquire tax exemption on some childcare costs. Tax-Free Childcare works by reducing the cost of childcare to 80 percent. The government pays £2 for each £8 you pay towards childcare. Basically,for £300 value of nursery costs,you’d pay £240 and the government would contribute the remaining £60. Thus,the childcare prices are effectively tax-free for parents. This is available to the value of £500 each 3 months,per child. Who is eligible for Tax-Free Childcare? Tax-Free Childcare is supposed to decrease the financial burden of childcare for working parents. It covers all of the exact same registered childcare services as childcare vouchers but is only available for kids aged 11 or below — 16 and under with a disability. {You are eligible if you and your partner (if you have one) are in work and earning at least the minimum wage for 16 hours per week or more. |} However, you won’t qualify if eitheryou or your partner has a taxable income over £100,000. The principal benefit with Tax-Free Childcare is that self explanatory workers may use the system. Instead of employers deducting prices before processing salary,the childcare prices are processed through an online account,in which the government contributes their 20% of the cost. Assessing both As previously mentioned,existing consumers of childcare vouchers may still continue to use them as long as their employer continues to utilize the strategy. {However, once they start using Tax-Free Childcare,their childcare vouchers will be ceased. |} So,which is better for you? Because childcare vouchers make your earnings exempt from bothtax and national insurance — rather than just redeeming the tax value just like Tax-Free Childcare — they are the best option for the majority of parents. On the other hand,the limits on just how much you can spend using childcare vouchers makes them unsuitable for parents with several children. { Tax-Free Childcare is your better option for just about any parents spending over £4,650 on registered childcare or working couples spending over £9,300.|} 30 hours free Another government strategy which goes together with Tax-Free Childcare is 30 Hours Free Childcare. {This really does exactly what it says on the tin — gives 30 hours of free childcare to parents that are eligible. |} Providentially,the eligibility criteria will be just like for the Tax-Free Childcare scheme. While parents receive 15 hours of free childcare for 3-4-year-old pre-school children,this strategy provides double that to those that are working over 16 hours weekly. Make contracting simpler Childcare is just one of many factors for contractors. In addition to this,you have invoicing,tax and expenses to worry about,together with your actual work. Umbrella Businesses make matters easier,processing your income and paying you a simple net sum each month {https://www.whichumbrellacompanies.com can help you find the ideal umbrella company. |} Our online comparison tool helps you compare various providers in a couple of minutes. Any questions? Get in touch with our team who will be delighted to assist.