{ What Childcare Vouchers Could You Claim as a Contractor? }

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Contractor Childcare Vouchers vs Tax-Free Childcare It is not easy balancing contracting work with childcare. You can either cut back on the job by looking after your children or shed a few of your earnings paying for childcare. Childcare vouchers offer a practical solution,providing people tax relief on the money that they set towards childcare. But from October 2018they will no longer be available to new applicants. Instead,individuals can argue throughout the Tax-Free Childcare scheme. {So,how does it work? |} Can contractors claim? And what’s the smartest choice for you? {Read on to getwww.whichumbrellacompanies.com guide to contractor childcare vouchers and tax-free childcare.|} What are childcare vouchers? The Childcare Voucher scheme allows employees to take a few of their wages as childcare vouchers,instead of money directly in their bank account. Why? By doing so,this component of the commission is exempt from tax and national insurance. Employees can take up to #55 per week of the wages as childcare vouchers. This can be used to pay for approved childcarecosts,such as: Registered childminders,nurseries or nightclubs Childminders through an Ofsted-registered agency A registered school A maintenance worker through a documented home care agency Depending upon the specific scheme,these vouchers may also be used on childcare assistance provided by your employer — like an on-site personnel nursery. Needless to say,these coupons can only be used to your child or stepchild who lives with you. £55 a week amounts to £243 per month and more than £2,800 within the span of a year. {Considering exemptions to both tax (20%) and national insurance (13.8percent),that provides a huge benefit of over £1,000 for basic rate tax payers.|} The amount you can claim is decreased slightly for greater and extra rate taxpayers: { Greater rate: £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 |} Since they are not classed as an employee,self-employed contractors can’t claim childcare vouchers. There are methods for contractors to acquire the advantages of tax-free childcarevouchers,however. {Firstly,by using their own limited company. |} Contractors working as a limited company can pay childcare providers directly,which will lessen their corporation tax bill. However,the simplest way is by way of a contracting umbrella. Since they add contractors as an employee,you also can get the benefits of childcare vouchers with no extra admin on your area. The value of childcare vouchers is only subtracted from your wage before it’s processed through pay-as-you-earn tax. Things are shifting From 4th October 2018,new applicants can no longer combine childcare voucher schemes. People already registered on a childcare vouchers scheme can continue to use it as long as they stay with the same employer and the employer continues to conduct the scheme. Instead of childcare vouchers,new programs need to go through Tax-Free Childcare to acquire tax exemption on a few childcare costs. Tax-Free Childcare operates by cutting the cost of childcare to 80 percent. The government pays £2 for each £8 you pay towards childcare. Basically,for £300 value of nursery costs,you’d pay £240 and the authorities would contribute the remaining £60. Thus,the childcare prices are efficiently tax-free for parents. This is accessible to the value of £500 each 3 months,per child. Who is eligible for Tax-Free Childcare? Tax-Free Childcare is supposed to decrease the fiscal burden of childcare for working parents. It covers all of the exact same registered childcare services as childcare vouchers however is only available for children aged 11 or below — or16 and under with a handicap. {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. |} But you won’t qualify if you or your spouse has a taxable income over £100,000. The main benefit with Tax-Free Childcare is that self-employed employees can use the system. Rather than companies deducting prices before processing wages,the childcare prices are processed through an online account,where the authorities contributes their 20 percent of the cost. Assessing both As mentioned,existing users of childcare vouchers can continue to use them provided that their employer continues to utilize the scheme. {But as soon as they start using Tax-Free Childcare,their childcare vouchers will be stopped. |} So,which is better for you? Because childcare vouchers create your earnings exempt from tax and national insurance — rather than simply redeeming the tax value just like Tax-Free Childcare — they’re the ideal option for the majority of parents. However,the limits on how much you can spend with childcare vouchers makes them unsuitable for parents with several children. { Tax-Free Childcare is the better choice for just about any parents spending over £4,650 on registered childcare or functioning couples spending over £9,300.|} Another government scheme that goes together 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 just like for its Tax-Free Childcare scheme. While parents receive 15 hours of free childcare for 3-4-year-old pre-school children,this scheme provides double that to those that are working over 16 hours a week. Make contracting simpler Childcare is only one of many factors for contractors. In addition to that,you have invoicing,tax and expenses to worry about,along with your true work. Umbrella companies make matters simpler,processing your earnings and paying you a simple internet sum each month {Which Umbrella Companies should you use can help you discover the right umbrella company. |} Our online comparison tool helps you compare different providers in a matter of minutes. Any queries? Get in touch with our staff who will be happy to assist.

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