Day: October 25, 2018

Contractor Childcare Vouchers vs Tax-Free Childcare It is not easy balancing contracting use childcare. You may either cut back on work by looking after your kids or lose a few of your earnings paying outfor childcare. Childcare vouchers provide a practical solution,providing people tax relief to the money they set towards childcare. However, from October 2018they will no more be available to new applicants. Instead,people can claim through the Tax-Free Childcare scheme. So,how does it work?  Can contractors assert? And what’s the best option for you? Continue Reading to get- manual to contractor childcare vouchers and tax-free childcare. What are childcare vouchers? The Childcare Voucher scheme permits employees to take a few of their wages as childcare vouchers,instead of money directly in their bank accounts. Why? By doing this,this component of their wage is exempt from tax and national insurance. Employees may take up to #55 per week of their wages as childcare vouchers. This can be utilized to pay for approved costs,including: Registered childminders,nurseries or clubs Childminders through an Ofsted-registered service A registered college A care worker through a registered home care service Depending on the specific scheme,these vouchers may also be utilized on childcare assistance supplied by your company — like an on-site personnel nursery. Needless to say,these coupons can only be used for your child or stepchild who lives with you. £55 per week amounts to £243 per month and over £2,800 over the course of a year. Contemplating exemptions for both tax (20 percent) and national insurance (13.8%),that offers a huge benefit of over £1,000 for basic rate tax payers. The amount you can claim is decreased slightly for higher and additional rate taxpayers:  Greater speed: £28 per week,£124 per month and £1484 per year Extra rate: £22 per week,£97 per month and £1166 per year Contractor childcare vouchers  Because they’re not classed as a employee,self-employed contractors can’t claim childcare vouchers. There are ways for contractors to get the benefits of tax-free vouchers,nevertheless. Primarily,through their own limited company.  Contractors working as a limited company may pay childcare providers directly,which will lessen their company tax invoice. However,the simplest way is through a contracting umbrella. Because they add contractors as an employee,you also can access the benefits of childcare vouchers with no extra admin on your part. The value of childcare vouchers is only deducted out of your wage before it’s processed through pay-as-you-earn tax. Things are shifting From 4th October 2018,new applicants can no longer join childcare voucher schemes. Folks already registered on a childcare vouchers scheme can continue to use it as long as they stay with the identical company and the company continues to conduct the scheme. Rather than childcare vouchers,new applications willneed to go through Tax-Free Childcare to acquire tax exemption on a few childcare expenses. Tax-Free Childcare works by cutting the price of childcare to 80 percent. The government pays £2 for each £8 you pay towards childcare. Basically,for £300 value of nursery expenses,you’d pay £240 and the government would contribute the rest £60. So,the childcare prices are effectively tax-free for parents. This is accessible to the value of £500 each three months,per kid. Who is eligible for Tax-Free Childcare? Tax-Free Childcare is meant to reduce the financial burden of childcare for working parents. It covers all of the same registered childcare providers as childcare vouchers but is only available for kids aged 11 or under — 16 and under having a disability. You’re eligible if you and your spouse (if you have one) are in work and earning at least the minimum wage for 16 hours per week or longer.  However, you won’t be eligible if you or your spouse has a taxable income over £100,000. The main advantage with Tax-Free Childcare is that self-employed workers may use the system. Rather than employers deducting prices before processing wages,the childcare prices are processed through an online account,where the government contributes their 20% of the cost. Assessing both As mentioned,present consumers of childcare vouchers may continue to use them as long as their company continues to utilize the scheme. However, as soon as they start using Tax-Free Childcare,their childcare vouchers will be ceased.  So,which is best for you? Because childcare vouchers make your earnings exempt from bothtax and national insurance — rather than just redeeming the tax value like Tax-Free Childcare — they are the best alternative for the majority of parents. However,the limits on just how far you can spend with childcare vouchers makes them unsuitable for parents with several children.  Tax-Free Childcare is the better option for any single parents spending over £4,650 on registered childcare or working couples spending over £9,300. Another government scheme which goes hand in hand with Tax-Free Childcare is 30 Hours Free Childcare. This really does what it says on the tin — provides 30 hours of free childcare to parents that are eligible.  Providentially,the eligibility criteria will be the same as for its Tax-Free Childcare scheme. While parents receive 15 hours of free childcare for 3-4-year-old pre-school children,this scheme offers double that to those that are working over 16 hours a week. Make contracting easier Childcare is just one of themany considerations for contractors. In addition to this,you’ve got invoicing,tax and expenses to worry about,along with your true work. Umbrella Businesses make matters simpler,processing your income and paying you a simple internet sum each month - can help you discover the right umbrella company.  Our online comparison tool helps you compare different providers in a couple of minutes. Any queries? Contact our team who will be delighted to assist.