Childcare vouchers and tax credits - better off calculator

Your employer may offer you childcare vouchers to help with your childcare costs. They could be in return for a reduction in your pay - known as a 'salary sacrifice'. Childcare vouchers may affect the amount of tax credits you can get. This online calculator can help you decide whether - overall - you would be better off taking the vouchers or not.

On this page:

What are childcare vouchers?

If you work and pay for childcare, your employer might be able to help with some of your childcare costs. Childcare vouchers are one way they can do this.

Leaflet IR115 explains more about childcare vouchers, and the other ways employers can help with childcare.

Download leaflet IR115 Paying for Childcare (PDF 153K)

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Who can use this calculator?

If you've been offered childcare vouchers by your employer, go to step one.

If your employer doesn't offer childcare vouchers, the calculator won't apply to you. But you can still use the calculator to see if you might benefit from vouchers. To do this, you should answer the questions as if you have been offered vouchers, and enter estimated amounts. If the results show that you'd be better off with vouchers, speak to your employer to see if they would consider offering them.

Step one

Check if both of the following apply:

  • you use registered or approved childcare
  • your employer has offered you childcare vouchers, or has arranged childcare for you with a commercial childcare provider, such as a nursery

If both apply, go to step two.

What is registered or approved childcare for tax credits

Step two

If one of the following applies, you don't need to use the calculator - you will be better off accepting childcare vouchers:

  • you have only one child and they don't normally live with you (unless you're in a couple and your child lives with your Crown Servant partner posted overseas, in which case go to step three)
  • your employer offers you childcare vouchers without reducing your pay

If neither of these apply to you, go to step three.

Step three

Don't use this calculator if you can answer 'yes' to any of the following:

  • the total amount of the vouchers you've been offered (or the amount your employer pays directly to a childcare provider for you) is over £55 a week or £243 a month
  • you live or work in the UK but you have a child outside of the UK (this does not include you if you're in a couple and your child lives with your Crown Servant partner posted overseas)
  • you are on Pension Credit and work 16 hours or more a week
  • you pay tax at the higher or additional rate

If any of these apply to you and you think you qualify for tax credits, you should make a claim. If you're already getting tax credits, and you accept the vouchers let the Tax Credit Office know. You'll need to tell them how much your income and childcare costs have gone down by.

If none of these apply, you can use the calculator.

Go to the start of the childcare vouchers and tax credits better off calculator

How to claim tax credits

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Information to get together before you start

Your income

Get together details of all your income (and your partner's if you have one) for:

  • the last tax year - which started on 6 April 2013 and ended on 5 April 2014
  • the current tax year - which started 6 April 2014 and ends on 5 April 2015

Check how to work out your income for tax credits

Your childcare costs

Work out your average weekly childcare costs before you start the calculator. This will help to save you time when you're asked for the information. For the calculator, you must include costs covered by any childcare vouchers you've been offered (including vouchers in return for a salary sacrifice).

Work out your childcare costs on GOV.UK (Opens new window)

Your vouchers or payments made directly by your employer

Get together details of the following:

  • the weekly, monthly or yearly amount of the childcare vouchers or the payments your employer makes directly to a childcare provider for you
  • the start date of the vouchers/employer payments

If your employer makes direct payments to a childcare provider, treat those payments as if they were vouchers when you use the calculator.

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Your results

The results are only a guide to whether you would be better off taking childcare vouchers. Your tax credits entitlement is worked out when you actually make a claim, or report a change of circumstances.

You may want to print off the results.

If your results show your income is below the national minimum wage

Any childcare vouchers you get in return for a reduction in your pay (called a 'salary sacrifice'), will reduce your hourly salary rate. This could take you below the national minimum wage for your age group. The results page will tell you if this might be a problem.

If this happens you may wish to speak to the Pay and Work Rights Helpline for help and advice.

Contact details for the Pay and Work Rights Helpline on GOV.UK (Opens new window)

Check the national minimum wage rates on GOV.UK (Opens new window)

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More useful links

You have children - can you get tax credits for them?

Your family doesn't live in the UK - can you get tax credits?

Childcare changes - effect on Working Tax Credit

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