Tax-free childcare FAQs
Childcare vouchers are an employee benefit for all eligible working parents. They are a Government-approved, tax-efficient way of paying for childcare. Childcare vouchers work through a system known as 'Salary Exchange'. This means that you receive the childcare vouchers instead of part of your salary.
Childcare vouchers save you money on registered care for younger and older children as you won't pay tax or national insurance on your selected voucher value. If you join the scheme, you can exchange up to £243 a month of your gross salary for childcare vouchers. The part of your gross salary you exchange for childcare vouchers is tax-free and exempt from National Insurance contributions (NI). Because of this, you can make savings of up to £933 per parent, per year.
The maximum reduction is £243 per month (for basic rate tax payers) and £124 (for higher rate tax payers); the minimum reduction is £5 per month.
Working parents / guardians, both men and women are eligible to participate, provided that their income after the deduction of salary sacrifice does not fall below the national minimum wage (NMW) or National Living Wage (NLW).
Any information which you provide to Edenred Childcare Vouchers when registering for the scheme and on an ongoing basis must be honest and accurate.
If you are found to be acting fraudulently in any aspect of your childcare voucher scheme membership, your membership will be revoked and you will be required to pay any tax or National Insurance liabilities which arise. You may also be subject to disciplinary action which could result in dismissal from your job.
Childcare vouchers are free from tax and NI contributions for the value of the vouchers you order. The amount you save depends on how much tax and national insurance you pay. If you are a basic rate taxpayer you can save as much as £933 (subject to individual circumstances) per parent, per year. For higher rate tax payers you can make savings of up to £624 per parent, per year. To find out how much you can save visit the savings calculator within the Edenred Childcare Vouchers application portal, or see below for examples:
Amount you can take
|Up to but not exceeding £43,000 (basic)||£243||£2,915|
|Greater than £43,000 but less than £150,000 (higher)||£124||£1,484|
|Over £150,000 (additional)||£110||£1,325|
*Total earnings include salary, other taxable benefits and allowances. Please speak to the HR department if you are unsure of the value of tax and NI exempt childcare vouchers you are entitled to take.
For all new joiners since April 2011 an annual earnings assessment carried out by the University will categorise you into a basic, higher or additional rate tax payer, which will then decide your maximum voucher amount.
|Total Earnings*/Rate||Amount (per year)|
|Up to but not exceeding £43,000 (Basic)||£933|
|Greater than £43,001 but less than £150,000 (Higher)||£623|
|Over £150,000 (Additional)||£623|
*These savings are subject to changes by HMRC
A parent / guardian is someone who maintains a child or stepchild (wholly, or partly) at their expense or who has parental responsibility for a child who resides with them. Grandparents, unless legal guardians, are not eligible to receive childcare vouchers.
In April 2011 HMRC introduced new rulings for higher rate tax payers and the potential savings that can be made. Higher rate tax payers joining the scheme after 6 April 2011 are now entitled to have a maximum allowance of £124 per calendar month.
Voucher top-ups allow parents to top-up their voucher account balance with their own money. This means that when your childcare costs exceed the value of your vouchers you can make a single payment (per month) to your child carer directly from your account. You can top-up via a direct debit if the top-up is a fixed amount or make a secure top-up payment using your debit or credit card.
Vouchers last for up to 30 months, so you can save them up for times when you may need extra childcare throughout the year. All vouchers expire on their expiry date. Expired vouchers will still be displayed in your account and can be reissued to you once you validate who you are, your child’s details and your childcare provider.
To withdraw from the scheme please follow the instructions on the Childcare Vouchers Guide
The window to make changes will be open from the 1st to the 15th of each month and will take effect in that months payroll.
The minimum amount of vouchers is £1.00
To amend the amount of childcare vouchers you have, please follow the instructions on the Childcare Vouchers guide.
Under HMRC rules, refunds are only allowed if you are unable to use your vouchers as a result of exceptional and unforeseeable circumstances.
If you have over-estimated the amount of vouchers you need and have a surplus of vouchers, it will not be possible to reimburse these to you but you will be able to use them for out-of-hours care and holiday play schemes.
(Any refunds will require the agreement of the University. Refunds must be processed through PAYE, so tax and National Insurance will be deducted. Please note that large refunds may take your pay into the next tax band. You must not accept any cash or change from your childcare provider in respect of your childcare vouchers.)
The University are unable to process a refund if you have left our employment.
When you choose to exchange part of your salary for childcare vouchers, your remaining salary must not be lower than the National Minimum Wage or National Living Wage. If your gross pay falls below the Lower Earnings Limit, you may lose entitlement to some state benefits. The University may restrict or cancel your ongoing voucher order in order to meet these requirements.
It is not possible to sacrifice statutory payments, so the University of Exeter may override your voucher order if you have insufficient non-statutory pay. For more information about Statutory Maternity Pay and childcare vouchers please visit Maternity Salary exchange.
You will enter into a salary sacrifice agreement each time you order childcare vouchers. The salary sacrifice agreement acts as a formal variation to your employment contract.
Your salary sacrifice agreement will be available for you to view and download from your online account. You can also request a paper copy of the agreement from Edenred Childcare Vouchers.
Taking childcare vouchers may have an effect on Tax Credits. Every family situation is different and we cannot comment on your individual circumstances but you can contact the HM Revenue & Customs Tax Credits helpline on 0345 300 3900, they will be able to help you decide what is best for your family. They also have an online tool called the ‘Childcare vouchers and tax credits better off calculator’ to help you decide whether you’ll be better off with childcare vouchers. You can access this tool at the gov.uk website.
The University will keep a record of your full notional salary (defined as the salary you would be receiving if you had not chosen to exchange part of it for childcare vouchers). All non-statutory employee benefits will be based on your full notional salary and will not be affected by your Childcare vouchers, these include:
- any pension scheme contributions and benefits
- any salary-related pay rises and bonuses
- non-statutory redundancy benefits
Any University Maternity Pay, University Adoption Pay and University Sick Pay will be based on your full notional salary. If you receive childcare vouchers while you are on maternity, adoption or sick leave, your salary sacrifice agreement will reduce any University Maternity Pay, University Adoption Pay and University Sick Pay by the amount of vouchers you receive.
If your salary sacrifice agreement leads to your gross pay falling below the Lower Earnings Limit, your entitlement to some state benefits, such as the Basic State Pension, may be affected.
If your earnings are low and you anticipate claiming jobseekers allowance, incapacity benefit or maternity allowance in the foreseeable future, you should seek advice from Edenred before joining the scheme.
Any statutory earnings-related benefits, such as statutory maternity pay, will be based on your reduced salary (i.e. your original salary less the value of your childcare vouchers). This means that the amount of benefits you receive could be reduced. However, if your employee benefits are higher than the statutory minimum, you may not be affected by this.
The impact on the state pension scheme is likely to be negligible. Most other pension providers are happy to accept childcare vouchers as notional pay. If you are contributing to a personal pension, you are unlikely to be affected by taking childcare vouchers, but we recommend that you seek advisement on this from your pension provider.
NHS Scheme Members
Under the NHS pension scheme rules, each year of your pensionable pay counts separately towards the build-up of your final pension benefits. Therefore, entering into or continuing with any salary sacrifice arrangement (e.g. Childcare Vouchers, Lease Car Schemes etc.) that reduces your gross pensionable pay will have a negative effect on the amount of pension you are able to build up in that year. The overall effect from participating in any Salary Exchange scheme would be to reduce the amount of final benefits you build. As being in Salary Exchange scheme will have this impact on your pension benefits the University does not offer Salary Exchange for Childcare Vouchers to our NHS members.
You can decide either to leave the scheme or to change the value of salary sacrifice you receive. To avoid any negative impact on your Statutory Maternity Pay/Statutory Adoption Pay, you may be advised to opt out of the scheme 23 weeks prior to the expected week of your childbirth/adoption (please speak to the HR Department for clarification). This is because your maternity/adoption pay is calculated over the 8 week period prior to the 15 week period before the expected week of childbirth/adoption. The effects should not be significant, but it is worth reviewing if you become pregnant to see what the best option for you is. For more information, please go to the University’s Salary exchange.
If you leave our employment, you will continue to have access to your childcare voucher account until your account balance is zero.
In the final pay period of your employment, your voucher order will not be pro-rated if you only work for part of the month. However, if your pay is insufficient to cover the full voucher order the University will override your voucher amount.
If you move to a new employer and sign up for your new employer’s childcare voucher scheme, you will be treated as a post-April 2011 joiner. Depending on your earnings, your childcare voucher order may then be restricted.
If you transfer to a new employer under TUPE or if the University experiences a change of ownership, you will be treated as a continuous member of the scheme rather than as a new joiner.
The University of Exeter
Northcote House (Rm 357A)
The Queen’s Drive
Phone: 01392 723413 (ext.3413 internal). Monday to Friday 9am-5pm.
We consider the Covid 19 pandemic to be a life changing event and therefore if you need to amend your vouchers throughout the year, please tick box other on the amendment form. We hope this will provide the flexibility needed at this time.