Tax advice of the week: Use your childcare vouchers

published 14 February 2011

If you're a higher-rate taxpayer (HRT), hurry up and take advantage of childcare vouchers before April 2011, says Moneysavingexpert.com. It's a government scheme operated through employers that lets you pay for any registered nursery, playgroup, nanny or au pair from your pre-tax salary.

So if you're a basic-rate taxpayer (BRT) and give up £1,000 of salary (worth about £700 after tax and national insurance) in return for £1,000 of vouchers, you'll be about £300 better off. You can pay for up to £243 of childcare each month (£55/week) per parent, so two working parents could get £486 a month in vouchers.

This can currently save BRTs a maximum of £890 per year, 40% taxpayers £1,170 and 50% taxpayers £1,460. The scheme once "benefited higher earners disproportionately", but as of April 2011 the situation will be reversed because of changes to national insurance. The maximum gain for the three groups will be £920, £610 and £590 respectively.

MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

"If you are already in the scheme by April 2011, then you can continue to get the current amount of vouchers." But if you don't need them yet, don't worry, most can be used for up to three years.

MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.