Childcare Vouchers -The Cost of Education

Time waits for no man….One minute Jabo (My first born) was a helpless bundle of puke and nappies with a cry that a fire engine would be jealous of. The next he is off to preschool at the tender age of two and a quarter.

Choosing a preschool isn’t easy. Obviously, as conscientious parents, we trawled through the ofsted reports checking that there were sufficient systems in place for education, creativity, the arts and core skills. If he can’t sing twinkle twinkle little star in B Minor whilst painting his take on picaso by the end of term I will be disappointed!

We also visited each of the potential schools to ensure that the staff and the key worker were sufficiently qualified to look after our bundle of joy. After all this we decided on the preschool closest to our house!  This was of course due to the outstanding ofsted report and excellent staff and nothing to do with the extra ten minutes in bed.

After being accepted and avoiding any kind of waiting list (I’m told this is very lucky) the subject of fees was brought up. It seemed ok until I checked that it was for the year. The retort of per term with a bemused look was not what I was expecting. Now I know that swearing is frowned upon in learning establishments so all I could say was “oh of course” in a small squeaky voice.

So I could still finance my sports coupe I needed to find a way of reducing the cost. After discounting home learning (Mrs TTF is so selfish!) tax savings were my next port of call.

The Tax Bit

If you are an employee the answer is child care voucher scheme. As with most organised reliefs you will need to ask your employer to set up the scheme but this is fairly straight forward and once up and running there is little administration.

Since 1998 HMRC have allowed employees to give up some of their salary in exchange for childcare vouchers which can be used to pay for all types of registered childcare including day nurserys, nannies, au pairs (the dads out there will be happy with this one!) out of school clubs etc.

If you are a basic rate tax payer then you can acquire £243 of vouchers per month tax and NIC free. If you are a higher rate tax payer you can acquire up to £124 (£243 if you joined the scheme before 05 April 2011) of vouchers per month tax and NIC free. Paying with vouchers will generate tax savings of up to £933 per year for a basic rate tax payer and £600 per year for a higher rate tax payer.

Some of you may know about the above scheme but did you know this is per parent. So potentially the above reliefs could be doubled if both parents are working.

All well and good but even TTF is prone to school boy errors. The vouchers are a welcome tax saving but they are capped per month which does not cover the full cost of our child care. If we had planned ahead we could have started the scheme from the date that Jabo was born. This means we could have saved up the vouchers until we needed them for preschool. So if you can plan ahead do so because it will save you £££ in the future.

Still the savings are enough that the cost of preschool is outweighed by the massive smile on Jabo’s face when he finished his first day and my massive smile blasting down the M11 in the TTF Mobil!

By Peter Cross

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