Child benefits and employee childcare schemes are there to help us provide for our children as best we can. Laura Bilcliff of Bulley Davey explains some of the things that both parents and employers should look out for...
Child benefits have been means-tested since 2013, meaning parents must prove their income sits below a certain threshold in order to receive them. Anyone with children can claim child benefits as follows:
- If both parents individually earn less than £50,000 a year, they can receive the full child benefit.
- If one parent earns between £50,000 and £60,000 a year, a ‘high income child benefit tax charge’ is levied. This has the effect of reducing the child benefit payment by 1% for each £100 earned over a £50,000 income threshold. For example, a couple where one partner earns £50,500 would lose 5% of the full child benefit.
- If one parent earns more than £60,000 a year, the tax charge means the child benefit payment is completely cancelled out, leaving them with nothing.
Since the means-test was introduced many parents have stopped claiming, especially those with a parent earning more than £50,000 as claiming to receive little or nothing isn’t seen as worth it. But what many of these parents may not realise is that they are jeopardising their state pension by failing to claim child benefit. This is because they are losing out on the automatic National Insurance (NI) payment, which could lead to a smaller state pension on retirement.
If you are in a position where this won’t affect you and you don’t want to pay the tax incurred for the sake of a state pension you won’t really use then you must let HMRC know by phone (0300 2003100) or by filling out a form available at www.tax.service.gov.uk
If one parent earns more than £60,000 a year and you do want to use the NI payments, especially for the lower-income parent, you can claim benefit at a ‘zero rate’. You won’t receive any child benefit but you will still get the NI credits. To apply for this zero-rate child benefit, tick the appropriate box in section 4 of the child benefit application form: www.gov.uk/child-benefit/how-to-claim
If you’ve stopped claiming and want to restart it isn’t too late, so long as your child is under 12. Contact HMRC to restart.
Employer Childcare Scheme
As an employer, an Employer Childcare Scheme is brings both social and economic benefits. There is a now a deadline of April 2018 to get things set up, so time is of the essence!
When parents return to work childcare often becomes a costly burden. In 2014 the Government announced the Tax-Free Childcare Scheme to take effect from this year, with applications open until April 2018. The scheme rivals, though doesn’t replace, the current Employer-Supported Childcare, but crucially it doesn’t require the employer to be involved.
As an employer the benefits of establishing an employer-supported scheme include not paying National Insurance on the Childcare Vouchers, which are worth up to £55 a week, or £243 a month for employees. The vouchers can be received through a salary sacrifice, so long as it doesn’t take earnings below the minimum wage. Employers can save up to £402 a year for every employee signed up to their scheme. Employers can also enjoy tax-relief of up to £1,000 a year – double if both parents are eligible.
Companies can administer their own scheme or hire an intermediary to do the leg-work of establishing a scheme for them. The key thing to remember is that only those businesses with schemes established before the April 2018 deadline will be able to see their benefits continue. Parents will only be able to benefit if they sign up to an employee scheme before this date.
Look into this and get set up before the deadline. Helping your employees is good practice, with benefits for both employer and employee. It’s a win-win scenario!
For more information or to speak to a specialist visit www.bulleydavey.co.uk or call 01733 569494.
Photo: Donnie Ray Jones