Employers – ensure you complete a Basic Earnings Assessment for your employees at the start of each tax year

Recently, our advisors at Employers For Childcare have spoken to a number of working parents who are receiving a lesser amount in Childcare Vouchers than they should be. This is because their employers have not been completing a Basic Earnings Assessment for them at the start of each tax year, and they are being treated as higher rate taxpayers, rather than basic rate taxpayers, for the purposes of claiming Childcare Vouchers, meaning that they are salary sacrificing – and saving – less than they are entitled to.

How to complete a Basic Earnings Assessment

To complete a Basic Earnings Assessment you take the employee’s Gross Pay, deduct their personal tax allowance (£12,570 for 2022/23), deduct the value of maximum Childcare Vouchers over a 12 month period (£2,916) and then deduct any pension contributions they make. The net figure after these deductions is the figure you use to see how much of their salary they can sacrifice into their Childcare Voucher account.

If their net pay after these deductions is below £37,700 then they can sacrifice £243 per month. If it is above £37,700, but below £150,000, then they can sacrifice £124 per month. If it is above £150,000 then they can only sacrifice £110 per month.

A Basic Earnings Assessment template is available to download from our website here.

Speak to an advisor

For more information contact our Family Benefits Advice Service on 028 9267 8200 or email hello@employersforchildcare.org