{ What Childcare Vouchers Can You Claim as a Contractor? }
Contractor Childcare Vouchers vs Tax-Free Childcare It’s hard balancing contracting use childcare. You may either cut back on the job by looking after your kids or shed a few of your earnings paying outfor childcare. Childcare vouchers provide a practical solution,giving people tax relief to the money that they put towards childcare. However, from October 2018,they will no longer be available to new applicants. Instead,individuals are able to argue throughout the Tax-Free Childcare scheme. {So,how does it allwork? |} Can contractors claim? And what’s the smartest choice for you? {Read on for- manual to contractor childcare vouchers and tax-free childcare.|} What are childcare vouchers? The Childcare Voucher scheme allows employees to take a few of their wages as childcare vouchers,rather than money directly into their bank accounts. Why? By doing this,this part of the commission is exempt from tax and national insurance. Employees may take up to #55 a week of the wages as childcare vouchers. This can be used to cover approved childcarecosts,such as: Registered childminders,nurseries or nightclubs Childminders through an Ofsted-registered agency A registered college A maintenance worker through a registered home care agency Depending on the specific strategy,these vouchers may also be used on childcare assistance supplied by your company — such as an on-site personnel nursery. Needless to say,these coupons can only be used to your child or stepchild who resides with you. £55 a week figures to £243 a month and more than £2,800 over the span of a year. {Considering exemptions to both tax (20 percent) and national insurance (13.8percent),that offers a huge benefit of over £1,000 for basic rate tax payers.|} The amount you can claim is reduced slightly for higher and extra rate taxpayers: { Greater rate: £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 childcarevouchers,however. {Firstly,through their own limited company. |} Contractors operating as a limited company may pay childcare providers right,which will lessen their corporation tax bill. However,the simplest method is through a contracting umbrella. Because they add contractors as an employee,you also are able to access the benefits of childcare vouchers with no extra admin on your area. The value of childcare vouchers is only deducted out of your wage before it’s processed through pay-as-you-earn tax. Things are shifting From 4th October 2018,new applicants can’t join childcare voucher schemes. Folks already enrolled on a childcare vouchers scheme can still continue to use it as long as they stay with the identical company and the company continues to run the strategy. Instead of childcare vouchers,new applications need to go through Tax-Free Childcare to gain tax exemption on a few childcare costs. Tax-Free Childcare works by cutting the price of childcare to 80%. The government pays £2 for each £8 you cover towards childcare. Essentially,for £300 value of nursery costs,you’d pay £240 and the government would contribute the rest £60. So,the childcare costs are efficiently 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 meant 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 under — or16 and under having a handicap. {You are 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 longer. |} However, you won’t qualify if eitheryou or your spouse has a taxable income over £100,000. The principal advantage with Tax-Free Childcare is that self explanatory workers may use the system. Rather than companies deducting costs before processing wages,the childcare costs are processed through an online account,where the government contributes their 20 percent of the cost. Assessing both As previously mentioned,present consumers of childcare vouchers may still continue to use them as long as their company continues to utilize the strategy. {However, once 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 tax and national insurance — rather than simply redeeming the tax value just like Tax-Free Childcare — they’re the best option for most parents. However,the limits on how far you can spend using childcare vouchers makes them unsuitable for parents with different children. { Tax-Free Childcare is your better choice for any single parents spending over £4,650 on registered childcare or working couples spending over £9,300.|} Another government strategy which 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. |} Fortunately,the eligibility criteria are the same as for its Tax-Free Childcare scheme. While allparents get 15 hours of free childcare for 3-4-year-old pre-school children,this strategy offers double that to individuals that are working over 16 hours a week. Make contracting easier Childcare is just one of themany considerations for contractors. In addition to this,you’ve got invoicing,tax and expenses to be worried about,along with your actual work. Umbrella companies make things simpler,processing your income and paying you a simple net sum Every Month {- can help you find the ideal umbrella company. |} Our online comparison tool can help you compare various providers in a matter of minutes. Any questions? Get in touch with our team who will be delighted to assist.