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Employer Supported Childcare 

Key information

If you are working, you might get help with childcare costs through Employer Supported Childcare (ESC), sometimes referred to as a Childcare Voucher Scheme.

From Autumn 2015 ESC will be replaced by a new Tax Free Childcare scheme, see our Tax Free Childcare information page.

Applies to: England, Wales, Scotland and Northern Ireland

Age rules: There are no specific age rules

Type of benefit: Non means tested 

Taxable: No

Administered by: Your employer

 

Index

You can read through this information sheet, or go directly to the sections you want to read by clicking on these links:

Who does it help?

If you are working, and you are responsible for a child who is in registered or approved childcare (link opens in a new window), your employer may offer help in the form of childcare vouchers. They do not have to offer this support, but if they do, they have to offer it to everyone who works for them.

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What help does it provide?

Employer Supported Childcare involves giving up some of your pay in order to receive childcare vouchers instead. This is called a salary sacrifice scheme.

Your employer can:

  • pay directly towards a childcare service, such as a workplace nursery
  • pay a subsidy to a registered provider outside of the workplace
  • provide you with a childcare voucher, usually via a childcare voucher company who administers the scheme.

The value of the vouchers reduces your gross salary (before tax and national insurance is deducted) so you make tax and national insurance savings if you get vouchers as part of your salary.

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Effect of salary sacrifice

If you get vouchers instead of money as part of your salary this could affect your entitlement to certain benefits. For example, your Tax Credits may be affected if the money you are paid falls below a certain level. Your rights to State Pension, Maternity Allowance, Statutory Maternity Pay, Statutory Paternity Pay and Statutory Adoption Pay could also be affected as these are based on your National Insurance contributions.

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How much could I save?

There is no limit to the value of childcare vouchers an employer can supply. However, only a maximum of £55 a week counts towards the tax/national insurance exemption.

How much you can receive as childcare vouchers without having to pay tax or national insurance depends on what rate of tax you pay and when you joined the scheme. If you joined the scheme on or after 6 April 2011, the limits are:

  • Basic rate tax payer         £55 per week
  • Higher rate tax payer        £28 per week
  • Additional rate tax payer   £25 per week

If you joined the scheme before 6 April 2011, the weekly limit is £55, whichever rate of tax you pay.

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Better off with Childcare Vouchers or Tax Credits?

You cannot claim for the same childcare costs through the Childcare element of Working Tax Credit and childcare vouchers.

For example: If Katy's childcare costs are £150 per week for her son, and she receives £105 per week through the childcare element of Working Tax Credit, she could only benefit from tax and national insurance savings on the £45 difference through the Employer Supported Childcare scheme, not the full £55.

If your employer offers you childcare vouchers and you want to know if you would be better off having the vouchers or claiming for help with childcare costs through Working Tax Credit, you can use the Gov.uk  website childcare cost calculator (link opens in a new window) on the HM Revenue and Customs website.

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How do I make a claim?

You apply for Employer Supported Childcare through your employer. They will be able to tell you which voucher provider they use, or provide details of any subsidy or workplace nursery they may run.

You will not be able to apply for Employer Supported Childcare after Autumn 2015 as it is being replaced by a new Tax Free Childcare scheme, see our Tax Free Childcare information sheet.

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What documents will I need?

The voucher provider will tell you what documents you need to provide. You will need the name and contact details of your childcare provider.

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Last updated: 8 May 2014

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