For working parents, the government has introduced an Employer Supported Childcare Scheme if you have children under the age of 16 and you currently pay for registered childcare. Directors/office holders/employees can get up to £55 a week towards their childcare free of tax provided that certain conditions are met. There are two types of childcare that you may find useful; directly contracted childcare or childcare vouchers. A third one, workplace nurseries, would apply to larger employers with nursery facilities on site.
To benefit from the directly contracted childcare scheme, your limited company should purchase a childcare place directly from a registered or approved local child-minder or nursery. Your company can then pay the amount equal to the tax-exempt limit of £55 per week or £243 per month.
The arrangement should be between the childcare provider and your limited company so the contract should be in your limited company’s name. The contract can be for any amount as long as the amount paid by your company to the childcare provider is no more than £55 a week, and this agreement is noted in the contract.
Alternatively, you can operate the Childcare Voucher Scheme. There are two options available:
From this date there will be changes for anyone either joining an employer supported Childcare Scheme, or leaving their current employment and joining another employer. Those affected will be employees or directors of a limited company whose employment income, which comprises of your salary or director’s fee plus any taxable benefits such as a company car, exceeds £45,000 in 2017/18 (2016/17 £43,000). If this is the case your tax relief will be restricted to the basic rate only.
Childcare provided by a relative does not count unless the relative is a registered or approved child-minder.
