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Introduction to this document

Childcare voucher salary sacrifice policy

Where childcare is provided by way of voucher, the first £55* per week is tax free if certain conditions are met. Whether you administer a voucher scheme yourself or engage an external voucher provider, you need a policy in place to demonstrate that your scheme meets the requirements.

An approved scheme

To meet the HMRC’s conditions for tax-free childcare, you will need evidence that the scheme is offered to all employees, so include a Childcare Voucher Policy in your staff handbook.

Our policy sets out two major conditions of the scheme. Firstly, that the child must be: (1) the employee’s child or stepchild; or (2) living with the employee and the employee has parental responsibility for them. Secondly, that the voucher must be used to pay for qualifying childcare by a registered childcare provider. Be aware that certain exclusions exist to prevent particular types of care from qualifying. Relief will be denied if the care is provided by a relative of the child, wholly or mainly in the child’s home. A relative is a parent, grandparent, aunt, uncle, brother or sister “whether by blood, half blood or civil partnership”.

Childcare provided by relatives can be qualifying if all the following apply:

  • the relative is a registered or approved childcare provider
  • the care is provided away from the child’s home
  • the care is provided to non-related children in addition to the related child.

* £28 per week if earnings are above the higher rate tax threshold, and £25 per week if earnings are above the additional rate tax threshold.

Note. Childcare voucher schemes cannot admit employees after 5 April 2018. However, you can continue to provide existing members of your scheme with tax and NI-free vouchers.