By PaperRocket Accounting, Jun 6 2019 01:45PM
It’s the final countdown for children and parents across the land. It’s just a few weeks left until summer holidays, and whilst that may have the kids jumping for joy, working parents may be frantically trying to organise what they are going to do with them for 6 weeks, and how they are ever going to fund it!
If you have your own limited company, you may well not be aware that your company can actually help you out with this predicament as you are actually able to expense some of your childcare costs. Currently, there are two ways of contributing to childcare costs from your company, via a voucher scheme or a direct agreement with a childcare scheme provider.
Unfortunately, since 5th October 2018, this type of scheme has been closed to new applicants, meaning that if you are not already a user of this scheme, you will need to apply to a new ‘tax free childcare’ scheme (where (provided neither you nor your partner earns more than £100,000/year) the government will pay £2 for every £8 you pay to a childcare provider via your online account up to a maximum of £2,000/year).
However, anyone already a member can still use the current voucher scheme for as long as your employer runs the scheme and you remain their employee.
With this scheme, vouchers are paid to employees which would then be used to pay for childcare. Your childcare provider will claim back their fees and there will be an admin fee from the company who issues the vouchers.
With this option, the employer will pay a provider for childcare costs on behalf of the employee. The amount paid will be set out in an agreement between the employer and employee.
How much can be paid
If you joined your company’s childcare scheme before 6th April 2011, the company can pay £55/week or £243/month which will be exempt from tax or NI contributions. Anyone joining after that date will need to have a basic earnings assessment conducted to calculate how much they will be entitled to receive tax/NI free.
Who qualifies for a childcare scheme
To qualify for either of the above schemes, the following criteria needs to be met:
• The childcare provider must be Offsted registered.
• You must have parental responsibility for the child you are claiming childcare for.
• Any payments outside the scheme, or above the exempt allowance won’t qualify for tax/NI exemption.
• You can claim for children up to 15, or 16 if they are registered disabled.
Therefore, if you are a director of and employed by your own limited company, and your childcare meets the criteria above, putting these childcare costs through your limited company is a great way to help with both your childcare costs, and also to help reduce your company corporation tax as this type of expense attracts corporation tax relief.
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