Backdating Childcare Vouchers to make even more savings

Childcare Voucher savings are based on an annual entitlement, usually spread over monthly salary sacrifice payments of up to £243. Some employers allow staff who are not set to reach their annual entitlement to sacrifice more of their salary, tax and National Insurance free, before the end of the tax year (March 2022), in order to reach their annual entitlement.

What is backdating?

Backdating allows parents to retrospectively claim their full entitlement to Childcare Vouchers if they have been salary sacrificing less than their full allowance per month throughout the year. This may be the case for many parents this year, due to changes in household circumstances or perhaps reduced access to registered childcare due to the Covid-19 pandemic, when we know some parents reduced the amount they were paying into their Childcare Voucher accounts.

Example

A basic rate taxpayer is allowed to sacrifice up to £243 per month, that’s up to £2,916 in the year to the end of March 2022. If you have been sacrificing £200 per month from April 2021 to January 2022 (totalling £2,000) you could, if eligible, sacrifice an additional £516 (£43 x 12 months) spread over the remaining two months of the tax year in addition to the £200 regular monthly sacrifice.

If your employer allows you to backdate then your remaining salary deductions for the tax year will need to be amended through your payroll.

It’s important you speak to your employer now to find out if you can backdate your Childcare Vouchers for 2021/22 and, if so, what the process is as it could take some time to process your request.

Please note: 

• Backdating is at the discretion of your employer – some employers do not permit employees to backdate Childcare Vouchers.
• We recommend your salary does not drop below £1,048 per month once all deductions have been made – including Childcare Vouchers – otherwise you may not be making any savings on your income tax or National Insurance Contributions.

Depending on the length of the eligible period:

• Basic rate tax payers can sacrifice a maximum of £2,916 to the end of March 2022.
• Higher rate tax payers can sacrifice a maximum of £1,488 to the end of March 2022.
• Additional rate tax payers can sacrifice a maximum of £1,320 to the end of March 2022.

Family Benefits Advice Service

If you have any questions about backdating, or Childcare Vouchers more generally, call our Family Benefits Advice Service for free, impartial and confidential advice on 028 9267 8200 or email hello@employersforchildcare.org.