About Tax Credits

Working parents are entitled to claim the Tax Credits from Revenue & Customs. Tax Credits are means tested and are assessed on the combined household income.

There are two sorts of tax credits as detailed below:

Child Tax Credit

•    Family Element

•    Family Element - Baby addition (worth £500)

•    Child Element

•    Disabled Child Element

•    Enhanced Disabled Child Element

Working Tax Credits

•    Top up to wages of low income families and must be working at least 16 hours a week

•    Childcare Element - worth up to 80% of eligible childcare fees.

As good practice, families who receive tax credits should inform the Revenue of their intention to receive childcare vouchers through their salary. Childcare Vouchers are a salary sacrifice scheme and therefore change an individual’s cash salary.

It is the childcare element of the Working Tax Credit that is affected by Childcare Vouchers. Parents cannot claim childcare vouchers for what financial help they are already receiving from the Inland Revenue – this would be classed as a double benefit.

For example: What are your total childcare costs? Deduct what you are receiving for childcare from the Revenue. Any remaining costs you have to pay for can be taken as Childcare Vouchers.

Higher income families who do not receive any help from the Tax Credits will benefit the most by using Childcare Vouchers.

The HMRC helpline is 0845 300 3900 or visit their website www.hmrc.gov.uk