There are various tax breaks available to assist with ‘approved’ childcare, including nannies. These include Child Tax Credit (CTC) and Childcare Vouchers. To be ‘approved’, nannies must join the Ofsted Childcare Register as a Home Childcarer.
Child Tax Credit
CTC is a means-tested allowance for parents and carers of children or young people who are still in full-time non-advanced education or approved training.
You don’t have to be the child’s parent to be eligible but you must be the main person responsible for them.
You may get CTC if you are responsible for at least one child under 16 or young person in full-time education at school or college, or doing approved training on a specified programme like Entry to Employment.
Child Tax Credits are based on your household circumstances, so you’ll need to give HM Revenue & Customs (HMRC) information about:
- your income
- your partner’s or civil partner’s income (if you have one)
- the children in your family
You may get more if you care for a disabled child. The other tax credit you may be entitled to, if either you or your partner is working, is called Working Tax Credit. It includes a childcare element to help families who are working and spending money on childcare.
Childcare Vouchers
If your employer gives you Childcare Vouchers, you will be eligible for tax relief on those vouchers provided ‘approved’ childcare is used. This will normally be implemented by a salary sacrifice system. The rules regarding tax relief on childcare vouchers have changed as follows:
- If you were already in a voucher scheme on 5 April 2011, the first £55 per week per employee will continue to be exempt from tax and national insurance (and employer’s national insurance)
- Since 6 April 2011, employers will be required at the beginning of the relevant tax year to estimate the level of basic employment earnings that any new employee joining the scheme is likely to receive and the employee will only be entitled to vouchers of £28 per week for a 40% taxpayer and £22 per week for a 50% taxpayer
If both parents receive childcare vouchers they are each entitled to receive the above limits per week free of tax and national insurance. For a basic-rate tax payer and for higher rate taxpayers joining a scheme after 5 April 2011, the tax and national insurance savings on £55 per week amount to £17.05 per week and for a higher-rate taxpayer already in the scheme the relief amounts to £22.55 per week for a 40% taxpayer and £27.50 for a 50% taxpayer. Childcare voucher schemes can be used as part of a salary sacrifice scheme or given as an addition to salary.
A childcare voucher scheme can be set up quite easily by your employer but there are various criteria including the scheme being available to all employees. The Human Resources Department should have further details. If you are a director of your own limited company and would be interested in setting up a childcare voucher scheme, Taxing Nannies would be happy to assist you.
How your nanny can become ‘approved’
Approval is achieved by joining the Ofsted Childcare Register as a Home Childcarer. Joining the register increases a nanny’s professional status, and enables parents to:
- become eligible for financial assistance with their childcare costs
- redeem employer-supported vouchers against childcare costs
To register, a nanny must:
- have a recognised childcare qualification (level 2/3) – including training such as the Common Core Skills & Knowledge course provided by Babyem
- be caring for children aged 0–17 years in the home of the family for an ongoing period of at least 2 hours a day (or less than 2 hours where the childcare provided is part of arrangements that start or end before or after normal school hours)
Your nanny can apply online on www.gov.uk/register-childminder-childcare-provider, or you can ask for a form that can be completed in writing. Ofsted will write to you to let your nanny know that they have received the application. The letter will include details on how to:
- obtain an enhanced CRB disclosure, unless Ofsted already hold a disclosure carried out within the past three years
- arrange a check of your nanny’s identity, the first-aid qualification and any other information they need at a local post office
- pay the non-refundable application fee of £103 (NB: to remain on the register, a separate fee is payable each year)
- provide any further information they need to decide on suitability of your nanny to provide childcare
