Financial Assistance for Nanny Employers
In the UK there are currently four forms of financial assistance for parents who employ a nanny. These are only available to employers who use nannies registered via one of the voluntary schemes:
- nannies registered as Home Childcarers on the Ofsted General Childcare Register in England
- nannies registered with the Childcare Approval Scheme in Wales
- nannies registered with an agency regulated by the Care Commission in Scotland
- and, nannies registered via the Home Childcarer Approval Scheme in Northern Ireland.
Childcare vouchers (employer supported childcare)
Employers who work for a business which offers childcare vouchers to its employees can reduce their salary by a certain amount in exchange for childcare vouchers for the same amount. This means they save on the tax and NI due on their pre-voucher salary.
Example: Mr A earns £1500/month gross (before tax and NI). He receives £100 in childcare vouchers and is taxed on £1400. Mrs A earns £2000/month. She receives £100 in childcare vouchers which means she is only taxed on £1900/month. Together they have £200 in childcare vouchers which they can use to pay their nanny, and they transfer the rest of her salary separately.
When employers want pay you with childcare vouchers you need to register with their voucher scheme. When the vouchers arrive in their account they can then transfer the same amount to your bank account. There can be a delay, particularly if your employer is paid on the last day of the month, because the transfer can only be initiated when the voucher lands in their account. A transfer can take 3-5 working days. This may mean part of your salary arrives later than the bank transfer from your employers. Employers can bank vouchers while you register, or to use the following month.
Childcare vouchers can only be used towards a nanny's net salary, and you may receive money from different voucher companies as well as your employers' bank account.
It is possible for a nanny employer to set up a voucher scheme so that their nanny can benefit from childcare vouchers to pay for registered care for their own child. In this case the nanny employer will benefit from a saving in employer National Insurance Contributions.
Parents whose earnings are below a certain threshold but who work a minimum number of hours per week can get help towards to cost of their childcare. They receive 70% of their childcare costs up to £175 per week for 1 child or £300 for 2 children directly into their bank account.
The whole cost of employing a nanny is taken into account for tax credits, so employers can use the money they receive into their account to pay you, HMRC for your tax and NI as well as their employer contributions, and towards to cost of a payroll company.
Childcare grants for students
Some students in full-time higher education who receive funding from Student Finance are eligible for a grant that covers up to 85% of their childcare costs, to a maximum of £155.24 per week for one child or £266.15 per week for 2 children (academic year 2015/2016 and 2016/2017).
2017: Tax Free Childcare
A new form of financial assistance is being rolled out, known as Tax Free Childcare. BAPN are working with the government on the implementation of this scheme. Nannies who are registered with one of the voluntary schemes will be able to be paid using this scheme. You can find more details here.
If you are currently registered you should check your details are up to date. You should have received a letter inviting you to register for Tax Free Childcare. We recommend that you do this as soon as you receive the letter with your information even if your current employers do not plan to use this scheme.