Calculate your tax and NI savings from salary sacrifice childcare vouchers and compare with Tax-Free Childcare.
This calculator provides estimates only. The Childcare Voucher scheme closed to new entrants in October 2018 but existing members can continue. Tax-Free Childcare is available as an alternative. Always check gov.uk for current eligibility rules.
Childcare Vouchers were a salary sacrifice scheme that allowed working parents to exchange part of their pre-tax salary for vouchers to pay for registered childcare. Although the scheme closed to new applicants in October 2018, existing members who were receiving vouchers before that date can continue to claim them for as long as they remain with the same employer and the employer continues to offer the scheme. The scheme works by reducing your gross salary before tax and National Insurance are calculated. Because you pay tax and NI on a lower salary, you effectively receive childcare support at a discount. The amount you can sacrifice depends on your tax band: basic rate taxpayers can sacrifice up to GBP 243 per month, higher rate taxpayers up to GBP 124 per month, and additional rate taxpayers up to GBP 110 per month. This calculator helps you understand how much you save through the voucher scheme and whether you might be better off switching to Tax-Free Childcare.
To calculate your childcare voucher savings: 1. Enter your annual salary. This is your gross salary before any deductions. The salary itself does not change the voucher amount, but it provides context for your overall tax position. 2. Select your tax band. Choose whether you are a basic rate (20%), higher rate (40%), or additional rate (45%) taxpayer. This determines your maximum monthly voucher amount and the rate at which you save tax. 3. Enter your monthly childcare cost. This is the total amount you spend on registered childcare each month, such as nursery fees, childminder costs, or after-school club fees. This is used to compare your voucher savings against Tax-Free Childcare. 4. Review the results. The calculator shows your monthly voucher amount, annual tax and NI savings, and the total annual saving. It also compares your savings with Tax-Free Childcare to show which scheme offers better value for your circumstances. 5. Check the chart. The bar chart visually compares the annual saving from Childcare Vouchers against the equivalent benefit from Tax-Free Childcare, making it easy to see which is better for you.
The childcare voucher saving is calculated using salary sacrifice principles. When you sacrifice part of your salary for vouchers, you avoid paying income tax and National Insurance on that amount. The maximum voucher amounts are set by HMRC based on your tax band: GBP 243 per month for basic rate taxpayers, GBP 124 for higher rate, and GBP 110 for additional rate. The tax saving is calculated as the voucher amount multiplied by your tax rate. For example, a basic rate taxpayer sacrificing GBP 243 per month saves GBP 48.60 per month in income tax (243 times 20%). The NI saving is calculated similarly using the 8% employee NI rate, giving an additional GBP 19.44 per month. The total annual saving combines both the tax saving and the NI saving across 12 months. For a basic rate taxpayer, this is approximately GBP 816 per year. For comparison, Tax-Free Childcare works differently. The government tops up your childcare account by 20% of what you pay in, up to a maximum of GBP 2,000 per child per year. So if you spend GBP 10,000 per year on childcare, the government adds GBP 2,000. The calculator compares both schemes to show which gives you a greater benefit.
The Childcare Voucher scheme was replaced by Tax-Free Childcare for new applicants from October 2018 onwards. If you are currently receiving vouchers, you have several important considerations. If you change employer, you will lose access to the voucher scheme and would need to apply for Tax-Free Childcare instead. If your employer is taken over or merges with another company, you may be able to continue receiving vouchers depending on the transfer terms. Both parents can each receive vouchers from their respective employers, effectively doubling the family benefit. This is particularly valuable for basic rate taxpayers, where combined annual savings can exceed GBP 1,600. Tax-Free Childcare is generally better for parents with high childcare costs (over GBP 800 per month) who are basic rate taxpayers, because the 20% government contribution on the full childcare cost often exceeds the tax and NI savings from vouchers. However, for higher rate taxpayers, vouchers can sometimes be more beneficial despite the lower monthly amount, because the tax saving per pound is greater. Qualifying childcare includes nurseries, childminders, nannies, au pairs, after-school clubs, and play schemes registered with Ofsted (or the equivalent in Scotland, Wales, and Northern Ireland). The child must be under 15, or under 16 if disabled. You cannot use vouchers to pay a family member who lives with you.