Child Care Costs

All employers can pay childcare costs or offer vouchers for directors/employees towards their childcare costs. Not only will the company get a deduction against its profits and thus save 20% corporation tax, you as the director/employee will not be subject to tax or national insurance contributions.

If you are a basic rate taxpayer, the company can pay £55 per week, £238 a month or £2,860 a year which will save corporation tax of £572. If both you and your spouse/partner are directors/employed by the company, the company can pay twice this amount – £5,760 a year saving tax of £1,144.

If the company does pay towards your childcare costs in this way, this means you don’t need to draw as much in dividends to pay for the costs yourself – this can save you personal tax each as well of £643.50.   

Certain conditions must be met of course, notably:

a) the childcare provider must be “registered” or “approved”

b) there must be a qualifying child – generally aged up to 15

c) the employee must offer this benefit to all employees

Changes being introduced from April 2015 to childcare costs provided by employers make it even more important to set in place a scheme before then as the rules that exist now are more favourable.

More information regarding this tax saving opportunity which is encouraged by the Government can be found here.

Do speak to me if this sounds of interest