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Childcare

This guide explains your tax and National Insurance contributions (NICs) obligations if you provide different types of employer-supported childcare. In many cases there is a partial or total exemption from tax, NICs and reporting.

On this page:

Workplace childcare facilities
Commercial childcare and childminders
Childcare vouchers - to 5 April 2011
Childcare vouchers - from 6 April 2011
If you reimburse an employee's childcare costs
Where to report - understanding the £8,500 threshold
More useful links
Technical guidance

Workplace childcare facilities

Definitions or restrictions

You provide a workplace childcare facility that meets all the following conditions:

the facility must have the appropriate registrations and approvals
childcare in the facility is available to all your employees
the children cared for are your employees' children, or children for whom your employees have parental responsibility
the childcare covers up to the end of the week containing 1 September following each child's 15th birthday (16th birthday for children with a disability)

The childcare facility doesn't have to be based at your workplace. It can be in other premises that you manage and finance, as long as the premises are not used wholly or mainly as a private residence.

What to report, what to pay

You have:

no reporting requirements
no tax or NICs to pay

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Commercial childcare and childminders - to 5 April 2011

Definitions or restrictions

You provide childcare support to your employees by contracting directly with a childcare provider - such as a commercial nursery or a childminder.

What to report, what to pay - up to £55 per week (£243 per month)

The first £55 per week is exempt from tax and NICs for all employees and doesn't need to be reported to HMRC, provided all the following conditions are met:

the childcare has the appropriate registrations and approvals
the childcare is available to all of your employees
the children cared for are your employees' children, or children for whom your employees have parental responsibility
the childcare covers up to the end of the week containing 1 September following each child's 15th birthday (16th birthday for children with a disability)

What to report, what to pay - above £55 per week (£243 per month)

For employees earning at a rate of less than £8,500 per year, you have:

no reporting requirements
no tax or NICs to pay

For company directors and employees earning at a rate of £8,500 or more per year:

report the amount above £55 on form P11D - section M
pay Class 1A NICs on the amount above £55 per week

Work out the value to use

The value to use is the cost to you of providing the childcare for your employee.

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Childcare vouchers - to 5 April 2011

Definitions or restrictions

You provide an employee with vouchers to exchange for childcare up to and including 5 April 2011.

What to report, what to pay - up to £55 per week (£243 per month)

The first £55 per week is exempt from tax and NICs and doesn't need to be reported to HMRC, provided all the following conditions are met:

the vouchers are for childcare that has the appropriate registrations and approvals
the vouchers are available to all of your employees
the children cared for are your employees' children, or children for whom your employees have parental responsibility
the vouchers cover childcare up to the end of the week containing 1 September following each child's 15th birthday (16th birthday for children with a disability)

What to report, what to pay - above £55 per week (£243 per month)

For employees earning at a rate of less than £8,500 per year:

report the amount above £55 per week on form P9D - section B
add the amount above £55 per week to the employee's earnings when deducting and paying Class 1 NICs (but not PAYE tax) through your payroll

For company directors or employees earning at a rate of £8,500 or more per year:

report the amount above £55 per week on form P11D - section C
add the amount above £55 per week to the employee's earnings when deducting and paying Class 1 NICs (but not PAYE tax) through your payroll

Work out the value to use

The value to use is the value of the childcare your employee can obtain with the voucher. This is usually the voucher's face value.

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Childcare vouchers and directly contracted childcare from 6 April 2011

The rules relating to childcare vouchers and directly contracted childcare changed on 6 April 2011. You can find information about the changes in HMRC's Helpsheet 'Employer Supported Childcare - Guidance and FAQs for employers' - use the link below.

Read HMRC's questions and answers - Changes to employer supported childcare (PDF 58K)

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You reimburse an employee's childcare costs

Definitions or restrictions

You provide an employee with childcare support in any of the following ways:

reimbursing the employee for their childcare bills
providing a cash allowance to cover childcare costs
providing additional salary to meet the cost of childcare

What to report, what to pay

In most cases the amount you reimburse counts as earnings, so:

add it to the employee's other earnings
deduct and pay PAYE tax and Class 1 NICs using your usual payroll procedures

Work out the value to use

The value to use is the amount that you reimburse to the employee.

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Where to report - understanding the £8,500 threshold

It's important to choose correctly between forms P11D and P9D for each employee. The form to use depends on the whether the employee is a director of your company and whether their earnings are above or below an annual rate of £8,500. For more information - including details of what's included in the £8,500 threshold - follow the link below.

End-of-year forms at a glance

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