Further Information: Working Tax Credits

Effects on Child Tax Credit and Working Tax Credit:

The Child Tax Credit (CTC) offers financial support with general family costs.  Working Tax Credit (WTC) supports those on lower incomes and working parents may be eligible for additional help towards registered childcare costs.  The amount of help parents receive will depend on a number of factors including their income, the size of their family and the amount they pay in childcare.

The receipt of childcare vouchers through a salary sacrifice scheme can affect parents’ entitlements to these tax credits in two main ways. 

1.    Where your average earnings have effectively been reduced, you could receive a higher payment through the WTC; however 

2.    The value received in childcare vouchers from us ("your employer"), cannot be considered as childcare costs when calculations are made for your entitlement to the childcare element of WTC.  (Essentially because you cannot claim twice for the same benefit). The childcare element of WTC may therefore be reduced.

It is advisable for you to find out what level of support you could be entitled to through the CTC and WTC before you sign up to our childcare voucher salary sacrifice scheme.  In some instances you may be financially better off opting to receive help through the WTC rather than using our childcare voucher scheme. 

For more information on Child Tax Credit and Working Tax Credit contact the Tax Credit helpline on 0845 300 3900 or visit www.taxcredits.inlandrevenue.gov.uk

How can I tell whether I would be better off with Tax Credits, or with a voucher scheme?

The following provides a rough guide as to whether you would receive more help from Tax Credits, or from taking advantage of the tax and NIC concessions through our Scheme. Your individual situation should be checked carefully before deciding which benefit is better for you, but:

Your family will generally be better off accepting childcare vouchers in return for a salary sacrifice if you can answer "yes" to one or more of the following:

• your eligible childcare costs are more than £175 per week if you have one child or £300 per week if you have two or more children. In this case you will always be better off accepting childcare vouchers to cover your childcare costs above these limits.
• you are receiving tax credits at the family element (£545 per year or £1,090 per year if you have a baby aged under one) or less and you are claiming for your childcare costs.

• you pay tax on your earnings at the higher rate of 40%.

Your family will generally be worse off or, at best, no better off accepting childcare vouchers in return for a salary sacrifice if you can answer "yes" to all of the following:

• you are receiving tax credits of more than £545 per year (or £1,090 per year if you have a baby aged under one) and you are claiming your childcare costs.
• you do not pay tax on your earnings at the higher rate of 40%.
• your eligible childcare costs are no more than £175 per week if you have one child or £300 per week if you have two or more children.

Our Childcare Voucher provider, Accor Services provide a Tax Credit Estimator, which is a user-friendly online calculator. Use the following link to try this facility: http:www.childcarevouchers.co.uk

This will divert you to the Accor website. When there, click on the "New Tax Credit Estimator" located on the right hand side of the page. When prompted, enter our scheme ID: CHUR6115.