childcare vouchers

New – see the effects of benefits in kind

The Salary Calculator has been updated with new options, to help those who receive taxable benefits, or “benefits in kind”, from their employer. As well as paying you your salary, your employer might offer other benefits, such as a company car or private healthcare. They pay for these benefits directly, but you have to pay tax on the value of the benefit (generally, you do not pay National Insurance on these benefits). Sometimes this extra tax is collected through your tax code – it lowers your tax-free personal allowance so that you pay the extra tax automatically. However, you may not know what your tax code will be with this benefit, or your employer might deduct the extra tax directly.

If this is the case, you can now enter the value of the benefit into the “Taxable Benefit” tab on the calculator, choose whether this amount is weekly, monthly or yearly, and then run the calculations to see how it affects your take-home pay. Since the amount of tax you pay will go up when you receive one of these benefits, your take-home pay will go down – but of course you’ll be receiving the benefit that you’ve paid tax on. This information will help you see how much the benefit will actually cost you each month.

To get started, head over to The Salary Calculator.

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None of the content on this website, including blog posts, comments, or responses to user comments, is offered as financial advice. Figures used are for illustrative purposes only.

Childcare voucher petition

Since my blog post about childcare vouchers earlier this week, I’ve heard from the people at Busy Bees Benefits, one of the companies that offer childcare voucher schemes to employers, like those I described in my blog post. They told me about a petition they have launched to increase the value of vouchers that could be received by parents tax-free.

As I described in my previous post, the value of vouchers that can be received tax-free is currently £2,915 per year, or £55 per week. This limit has been the same since 2006, but many parents are finding that the cost of childcare has increased in the years since then so the vouchers do not cover as much of their childcare fees. Busy Bees Benefits are trying to get this limit raised to £75 per week (£3,975 per year), and the first step is to get 100,000 signatures on the petition so the proposal can be debated in Parliament. Increasing the tax-free limit would allow parents to sacrifice more of their salary in exchange for vouchers, therefore saving more tax and National Insurance.

More details are available on the Busy Bees Benefits childcare voucher petition page, where you can learn more and sign the petition if you want to back the change!

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Thursday, June 14th, 2012 Income Tax, National Insurance No Comments

Childcare Vouchers added!

The Salary Calculator has been updated with a new option for Childcare Vouchers. Some employers offer employees the opportunity to have some of their pay in the form of vouchers which can be exchanged with accredited childcare providers instead of cash. These vouchers can be taken tax-free, saving the employee money.

Childcare vouchers are subtracted from your salary before tax and National Insurance, like pension contributions. However, there is a limit to the amount that can be taken tax-free each year – for the current tax year, this amount is £2,915. You can receive childcare vouchers above this amount, but you will not get the tax benefits. If you signed up for the voucher scheme before 6th April 2011, this limit applies no matter how much you earn. However, if you joined the scheme after this date and pay tax above the 20% Basic Rate, the amount you can receive tax-free is reduced. For those paying 40% tax (typically earning £42,475 or more), the tax-free allowance for childcare vouchers is £1,484 – and for those paying 50% tax (earning over £150,000) it is just £1,166.

To see how childcare vouchers can affect your take-home pay, head over to The Salary Calculator and enter your salary, along with the value of vouchers you receive each month. If you joined the scheme before 6th April 2011, tick the box to this effect. Enter the rest of your details and click Go! to see the results.

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