Contractor Childcare Vouchers vs Tax-Free Childcare It’s not easy balancing contracting use childcare. You may either cut back on work 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 they set towards childcare. But from October 2018,they will no more be available to new applicants. Rather,individuals are able to argue throughout the Tax-Free Childcare scheme. So,how does it work?  Can contractors claim? And what is the smartest choice for you? Continue Reading to get- manual to contractor childcare vouchers and tax-free childcare. What are childcare vouchers? The Childcare Voucher scheme permits employees to take a few of their wages as childcare vouchers,instead of money directly into their bank accounts. Why? By doing this,this component 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 pay for approved costs,such as: Registered childminders,nurseries or nightclubs Childminders through an Ofsted-registered service A registered school A maintenance worker through a documented home care service Depending on the particular strategy,these vouchers may also be used on childcare assistance supplied by your company — such as an on-site staff nursery. Obviously,these vouchers can only be used to your ownchild or stepchild who lives with you. £55 a week figures to £243 a month and more than £2,800 over the span of a year. Contemplating exemptions to both tax (20%) and national insurance (13.8percent),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:  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 a employee,self-employed contractors cannot claim childcare vouchers. There are methods for contractors to acquire the advantages of tax-free vouchers,however. Primarily,by using their own limited company.  Contractors working as a limited company may pay childcare providers right,which will reduce their company tax invoice. However,the simplest way is by way of a contracting umbrella. Since they add contractors as an employee,you also are able to access the benefits of childcare vouchers with no extra admin on your part. The value of childcare vouchers is simply deducted out of your wage before it is processed through pay-as-you-earn tax. Things are changing From 4th October 2018,new applicants can no longer join childcare voucher schemes. People already enrolled on a childcare vouchers scheme can still continue to use it as long as they remain with the identical company and the company continues to conduct the strategy. Rather than childcare vouchers,new applications need to go through Tax-Free Childcare to acquire tax exemption on a few childcare costs. Tax-Free Childcare works by reducing the price of childcare to 80 percent. The government pays £2 for every £8 you pay towards childcare. Basically,for £300 worth of nursery costs,you’d pay £240 and the government would contribute the remaining £60. So,the childcare costs are efficiently tax-free for parents. This is available to the value of £500 every three months,per kid. Who is eligible for Tax-Free Childcare? Tax-Free Childcare is supposed to reduce the fiscal burden of childcare for working parents. It covers all the same registered childcare providers as childcare vouchers but is only available for kids aged 11 or under — or16 and under with a disability. 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 longer.  But you won’t be eligible if you 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 employers deducting costs before processing wages,the childcare costs are processed through an online account,in which the government contributes their 20% of the cost. Comparing the two As mentioned,present consumers of childcare vouchers may still continue to use them as long as their company continues to use the strategy. But as soon as they start using Tax-Free Childcare,their childcare vouchers will be ceased.  So,which is best for you? Because childcare vouchers create your earnings exempt from bothtax and national insurance — rather than simply redeeming the tax value just like Tax-Free Childcare — they’re the best alternative for most parents. However,the limitations on just how much you can spend with childcare vouchers makes them unsuitable for parents with several children.  Tax-Free Childcare is your better option for any single parents spending over £4,650 on registered childcare or working couples spending over £9,300. 30 hours free Another government strategy that goes together with Tax-Free Childcare is 30 Hours Complimentary Childcare. This does exactly what it says on the tin — gives 30 hours of free childcare to parents who are eligible.  Fortunately,the eligibility criteria will be just like for its Tax-Free Childcare scheme. While parents get 15 hours of free childcare for 3-4-year-old school-age kids,this strategy offers double that to individuals who are working over 16 hours weekly. Make contracting simpler Childcare is just one of themany factors for contractors. On top of this,you’ve got invoicing,tax and expenses to be worried about,along with your true work. Umbrella Businesses make things simpler,processing your income and paying you an easy net sum each month - can help you discover the right umbrella company.  Our online comparison tool helps you compare various providers in a couple of minutes. Any questions? Contact our team who will be delighted to assist.