Childcare Vouchers are a scheme whereby employers can assist employees with childcare costs. The first £55 worth of vouchers per week is exempt from tax and NIC’s.
The vouchers can be in addition to your salary but are more often a ‘salary sacrifice’. The vouchers are exempt from National Insurance Contributions therefore you will only pay contributions on your reduced salary, saving up to 11% on NIC. The vouchers can then be used to pay your nanny or other forms of childcare.
Your nanny will need to be Ofsted Registered and on the Ofsted Childcare Register for them to receive payments via Childcare Vouchers. They will also need to register with a childcare voucher redemption company which will enable the payments to go directly into the nanny’s bank account. There is no cost for the nanny and apart from registration there is no more the nanny needs to do.
PAYE for Nannies operates many payroll schemes for parents who currently use Childcare Vouchers and can answer most general queries about this initiative.