Understanding Childcare Tax Exemptions

Understanding Childcare Tax Exemptions: As an employer, you may be interested to know that certain childcare benefits can be offered to your employees without triggering Tax or National Insurance obligations. Below is an outline of what qualifies for these exemptions, along with the applicable limits.

Exempt Childcare Benefits

Workplace Nurseries

If you provide childcare places for employees’ children in a workplace nursery, you do not have to report or pay Tax or National Insurance, provided the nursery meets the following criteria:

• Appropriate Registrations: Must have the necessary registrations and approvals.

• Employee Availability: Must be available to all your employees.

• Childcare Provision: Must offer childcare for your employees’ children or those for whom they have parental responsibility.

• Age Compliance: Must provide care up to the maximum age permitted by its registration.

Note: The nursery does not have to be located at your workplace; it can be in other premises you manage and finance, as long as they are not private residences.

Commercial Childcare or Vouchers

You can offer a fixed amount of employee-supported childcare or vouchers without any reporting obligations if:

• Employees joined your childcare or voucher scheme and had their wages adjusted on or before 4 October 2018.

• The childcare or vouchers meet the criteria for workplace nurseries.

Certain low-paid employees may be excluded from the requirement for childcare to be available to all employees. For more details, refer to HMRC’s technical guidance on childcare voucher exemption – https://www.gov.uk/expenses-and-benefits-childcare/technical-guidance

Exemption Limits

The exemption limits vary based on when employees joined the childcare scheme.

Here’s a summary:

Rate of Income Tax Weekly Exempt Limit Monthly Exempt Limit

Basic £55 £243

Higher £28 £124

Additional £25 £110

For employees who applied to join a childcare scheme before 6 April 2011, the limit is £55 a week or £243 a month. For those who joined on or after this date, the exemption limits depend on their Income Tax rate.