Working parents can use salary sacrifice to reduce the impact of the recent cuts in child benefit announced in the Budget, according to Edenred, the UK’s leading provider of childcare voucher benefits.
The changes announced in the Budget will mean child benefit will now be withdrawn gradually from higher rate taxpayers earning between £50,000 and £60,000. The benefit will be reduced by one per cent for every £100 earned over £50,000 and completely removed for those earning over £60,000.
Under the Chancellor’s Budget, around 1.2 million families will now have their child benefit payments reduced. Around 840,000 of those households will lose all of the benefit. The other 360,000 will lose a portion of the benefit through the new tapering rule.
However, Edenred is advising working parents to use salary sacrifice for benefits such as childcare vouchers in order to reduce their taxable income to below the threshold and therefore offer a little more staff rewards.
Childcare vouchers are usually offered by employers via a salary sacrifice scheme which means they are taken from a parent’s pre tax salary and, depending on the rate of tax payer, are free from tax and National Insurance up to £243 a month. Both parents can claim these vouchers if their employer offers the scheme. The benefit for the company is also a lower National Insurance bill.
They can then be used for children up to 15 years, or 16 years if disabled, and can be spent on a wide range of activities such as afterschool clubs, holiday clubs, breakfast clubs, as well as nurseries, childminders and nannies. The age range covered by the vouchers means that parents of older children can also benefit.
Laura Czapiewski, product manager at Edenred, comments:
“With the Chancellor’s recent cuts to child benefit, many will be looking at ways to address this loss. The provision of childcare vouchers via a salary sacrifice scheme has multiple benefits – it serves to save a working parent tax and NI and could also help reduce their taxable income below the threshold that will be affected by the changes to child benefit.
“Any type and size of business can implement a childcare voucher scheme and it’s worthwhile for companies of all sizes, even if they have just one qualifying parent within the organisation. Parents should investigate if their place of work offers childcare vouchers.”
Edenred is the UK’s leading provider of childcare voucher benefits and has a website dedicated to childcare vouchers explaining how they work, the benefits and where to use them. See: http://www.childcarevouchers.co.uk/Parents/Pages/default.aspx