Childcare vouchers and salary sacrifice explained
In an effort to reduce the costs of childcare for working parents or legal guardians, the Chancellor announced that from 5 April 2005 employers can provide childcare vouchers up to a value of £50 per week free from tax and national insurance contributions. Human resources consultant Sandra Beale explains how the scheme works.
To take advantage of this tax beneficial offer the employee formally agrees to give up part of their salary in exchange for the vouchers. This is known as salary sacrifice.