Do You Have To Declare Childcare Vouchers In A Self-Assessment Tax Return?

If your concern is regarding the declaration of child care vouchers in a self-assessment tax return, you will find relief from that concern as you read along with the detailed guidance in the following blog post. In addition to addressing your concern, we will also explore the situations in which child care vouchers must be declared in a self-assessment tax return, discuss the process involved; as well as review the exemption limits that make your child care vouchers tax-free.

Do You Have To Declare Childcare Vouchers In A Self-Assessment Tax Return?

Whether or not you have to declare childcare vouchers in a self-assessment tax return depends on two key factors. These are:

• if the child care vouchers are valued within your exemption limit
• if your employer has given you childcare vouchers in exchange for a salary sacrifice

If you are receiving childcare vouchers from your employer, you would notice that they are valued at a certain amount. This amount is an indication of your exemption from tax and National Insurance contribution. 

This means that as long as the child care vouchers in your use are within your assigned limit for exemption, you will not have to declare them in a self-assessment tax return as they are tax-free.

The second important point to consider is whether you’ve received childcare vouchers in exchange for a salary sacrifice. This is the most common way of giving child care vouchers to employees by employers when they offer child care vouchers in exchange for foregoing an equal amount of deduction from an employee’s earnings.

If you’ve received child care vouchers in exchange for a salary sacrifice, you don’t have to declare them on a self-assessment tax return as they are part of your earnings. However, if you are getting childcare vouchers from your employer without a salary sacrifice, you will have to declare them in a self-assessment tax return.

It is important to note that no new applications for childcare vouchers are being accepted since 2018. While the previous recipients can still continue using childcare vouchers, new candidates will have to apply for the UK Government’s Tax-Free Childcare scheme.

How Do You Declare Childcare Vouchers In A Self-Assessment Tax Return?

If you receive childcare vouchers above the exempt limit, you will need to declare this amount on your self-assessment tax return. You can do this by following these steps:

Step 1: Go to the GOV.UK website for Personal tax: Self Assessment and log in to your account.

Step 2: Click on the “Start a return” button.

Step 3: Select the “Childcare vouchers” option.

Step 4: Enter the total amount of childcare vouchers you received above the exempt limit.

Step 5: Enter the date you joined the childcare scheme.

Step 6: Enter the name of your employer.

Step 7: Click on the “Submit” button.

Based on the information that you enter, HMRC will then calculate the amount of tax and National Insurance you owe on the excess amount of childcare vouchers. You will need to pay this amount by the deadline shown on your tax return.

What Are The Exemption Limits For Childcare Vouchers In A Self-Assessment Tax Return?

The exemption limits for childcare vouchers are based on the year in which an employee would have joined the scheme. For instance, for employees who joined a childcare scheme before 6 April 2011, the exemption limit is £55 per week or £243 per month.

On the other hand, for employees who joined a childcare scheme on or after 6 April 2011, the exemption limit is further classified on the basis of their income and their income tax rate. This can be categorised as under:

• the exemption limit for basic rate taxpayers is £55 per week or £243 per month
• the exemption limit for higher rate taxpayers is £28 per week or £124 per month.
• the exemption limit for additional rate taxpayers is £25 per week or £110 per month.

How Are Childcare Vouchers Reported In A Tax Return For PAYE Employees?

How childcare vouchers are reported in a tax return for PAYE employees depends on whether the value of the vouchers is within or in excess of their exemption limit.

If you are a PAYE employee who benefits from childcare vouchers within the exemption, your employer will include the total value of these vouchers in your P11D form. In this case, you don’t need to take any further action regarding this information. 

However, if you happen to receive childcare vouchers that exceed the exempt limit, your employer will report the excess on your P11D form. As a result, you will be responsible for paying tax and National Insurance on this particular amount. 

Due to this, you will need to mention this amount in your self-assessment tax return to ensure that you stay compliant with the relevant regulations.

Conclusion:

The above discussion helps to conclude that not everyone who receives child care vouchers is required to declare them on a self-assessment tax return. As long as the child care vouchers your get are valued within your tax-free exemption limit, there is no requirement by law to declare them in your self-assessment tax return as (a) the vouchers are tax-free (b) your employer would have already declared them in your P11D form.

References:

Expenses and benefits: childcare: What to report and pay – GOV.UK

Expenses and benefits: childcare: What’s exempt – GOV.UK

Do I need to report nursery or childcare vouchers? – Knowledge Base