Childcare query (direct co payment vs Gov's tax-free childcare)

[macray76]

Hi.

I currently directly pay my childcare provider £243 a month from company funds (this is not through childcare vouchers).

However, I'm now eligible to sign up for the Government's tax-free childcare scheme but all documentation mentions that you can't be part of a childcare voucher scheme and claim tax-free childcare.

It does not specifically mention whether this is the same for those who have childcare directly paid for by their company.

My theory is that HMRC treat these exactly the same so I have a decision to make...
- keep paying direct from company and pay remaining balance from personal funds,
- set up a childcare voucher scheme before April, or
- ditch all that and go for tax-free childcare (but be hit with additional personal tax due to having to take out more dividends).

Anyone have any thoughts on this?

Thanks in advance!

[TheFaQQer]

Can't see tax free childcare being worthwhile for someone operating as a contractor.

Depending on the level of dividends you take and total income, you might make more this way if you're a lower rate payer since you'll get £2 for every £8 paid in. But if the dividends are at a higher rate then you're going to lose out by moving into the scheme.

TFC is also only available for the under fives.

[macray76]

Thinking the same. Going to stick with paying directly from company as our childcare costs are pretty low and I don't expect them to be more than £243 a month going forward.

Oh and the tax-free childcare scheme is now open to under 9s as I was able to register for my 7 year old (although it also took in the details of my 10 year old too).

[tarbera]

some good advice here

Thinking the same. Going to stick with paying directly from company as our childcare costs are pretty low and I don't expect them to be more than £243 a month going forward.

Oh and the tax-free childcare scheme is now open to under 9s as I was able to register for my 7 year old (although it also took in the details of my 10 year old too).

https://www.moneysavingexpert.com/fa...dcare-vouchers


but only if you earn under £100K which rules a lot of people out

[TheCyclingProgrammer]

My understanding is that you can keep using a voucher scheme as long as it’s already in place before April.

I wonder how this applies to directly contracted childcare though. Presumably if you have a contract in place it continue but what about after April? It’s something we need to think about as our youngest will be starting nursery this year.

[l35kee]

https://www.moneysavingexpert.com/fa...dcare-vouchers


but only if you earn under £100K which rules a lot of people out

Doesn't include dividend income does it? Shouldn't rule any of us out.

[tarbera]

ohhmy

Doesn't include dividend income does it? Shouldn't rule any of us out.

you are correct madam - dividend income is exculded