{ What Childcare Vouchers Can You Claim as a Contractor? }

Contractor Childcare Vouchers vs Tax-Free Childcare It’s not easy balancing contracting use childcare. You can either cut back on work by looking after your children or shed some of your earnings paying outfor childcare. Childcare vouchers provide a sensible solution,providing people tax relief on the money that they set towards childcare. However, from October 2018they will no longer be available to new applicants. Rather,people can argue throughout the Tax-Free Childcare scheme. {So,how does it work? |} Can contractors claim? And what’s the best option for you? {Read on for- guide to contractor childcare vouchers and tax-free childcare.|} Which are childcare vouchers? The Childcare Voucher scheme permits employees to take some of their wages as childcare vouchers,instead of money directly in their bank accounts. Why? By doing this,this component of the wage is exempt from tax and national insurance. Employees can take up to #55 a week of the wages as childcare vouchers. This can be used to cover approved costs,including: Registered childminders,nurseries or nightclubs Childminders through an Ofsted-registered agency A registered college A maintenance worker through a documented home care agency Depending on the specific scheme,these vouchers may also be used on childcare assistance provided by your employer — like an on-site staff nursery. Obviously,these coupons can only be used for your child or stepchild who lives with you. £55 a week figures to £243 a month and more than £2,800 within the course of a year. {Contemplating exemptions for both tax (20%) and national insurance (13.8%),that offers a net benefit of over £1,000 for basic rate tax payers.|} The amount you can claim is reduced slightly for higher and additional rate taxpayers: { Higher speed: £28 per week,£124 per month and £1484 annually Additional rate: £22 per week,£97 per month and £1166 annually Contractor childcare vouchers |} Because they are not classed as an employee,self-employed contractors can’t claim childcare vouchers. There are methods for contractors to acquire the advantages of tax-free vouchers,however. {Firstly,through their own limited company. |} Contractors operating as a limited company can pay childcare providers right,which will reduce their corporation tax bill. On the other hand,the easiest way is through a contracting umbrella. Because they add contractors as an employee,you can get the benefits of childcare vouchers with no extra admin on your part. The value of childcare vouchers is simply subtracted from your wage before it is processed through pay-as-you-earn tax. Things are shifting By 4th October 2018,new applicants can no longer join childcare voucher schemes. People already registered on a childcare vouchers scheme will continue to use it as long as they stay with the identical employer and the employer continues to run the scheme. Instead of childcare vouchers,new programs need to go through Tax-Free Childcare to acquire tax exemption on some childcare expenses. Tax-Free Childcare works by cutting the cost of childcare to 80 percent. The government pays £2 for every £8 you cover towards childcare. Essentially,for £300 worth of nursery expenses,you’d pay £240 and the government would contribute the remaining £60. Thus,the childcare prices are effectively tax-free for parents. This is accessible to the value of £500 every 3 months,each child. Who is eligible for Tax-Free Childcare? Tax-Free Childcare is meant to reduce the financial burden of childcare for working parents. It covers all the exact same registered childcare services as childcare vouchers but is only available for children aged 11 or under — 16 and under with a handicap. {You’re eligible if you and your spouse (if you have one) are in work and earning at least the minimum wage for 16 hours a week or more. |} However, you won’t qualify if you or your spouse has a taxable income over £100,000. The principal advantage with Tax-Free Childcare is that self explanatory workers can use the system. Rather than companies deducting prices before processing wages,the childcare prices are processed through an online account,in which the government contributes their 20 percent of the price tag. Comparing the two As mentioned,existing consumers of childcare vouchers can continue to use them as long as their employer continues to use the scheme. {However, as soon as they start using Tax-Free Childcare,their childcare vouchers will be stopped. |} So,which is best for you? Because childcare vouchers make your earnings exempt from bothtax and national insurance — rather than just redeeming the tax value like Tax-Free Childcare — they are the ideal option for the majority of parents. On the other hand,the limitations on how far you can spend with childcare vouchers makes them unsuitable for parents with different children. { Tax-Free Childcare is your better option for any single parents spending over £4,650 on registered childcare or functioning couples spending over £9,300.|} 30 hours free Another government scheme that goes hand in hand with Tax-Free Childcare is 30 Hours Complimentary Childcare. {This does 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 its Tax-Free Childcare scheme. While parents receive 15 hours of free childcare for 3-4-year-old pre-school children,this scheme offers double that to individuals that are working over 16 hours weekly. Make contracting simpler Childcare is just one of many considerations for contractors. In addition to this,you have invoicing,tax and expenses to worry about,together with your actual work. Umbrella companies make things easier,processing your income and paying you a simple net sum Every Month {- can help you find the right umbrella company. |} Our online comparison tool helps you compare various providers in a couple of minutes. Any questions? Get in touch with our staff who will be delighted to assist.