If your employer's scheme meets the criteria of a 'qualifying' scheme, these vouchers carry tax relief. Although you sacrifice some of your gross pay, the vouchers do not have tax or NI deducted from them. Therefore, under the existing rules, the tax relief available is a maximum of £920 per parent per annum- irrespective of the level of your income.
However, from 6 April 2011, new joiners may receive only the following tax relief:
- Basic (20%) Taxpayer - Allowed £55/week vouchers, maximum annual gain £920
- Higher (40%) Taxpayer - Allowed £28/week voucher, maximum annual gain £610
- Top (50%) Taxpayer - Allowed £22/week voucher, maximum annual gain £590
Based on the information you have supplied, it sounds like you would benefit from joining the scheme and it would be advisable to join the scheme prior to 6 April 2011, when the rules change for higher rate tax payers like yourself.
If you failed to join the scheme prior to 6 April 2011, your employer could still pay you £55 per week, however, the additional £22 would need to be declared as a benefit in kind on form P11D.
A final word of warning though- if, in the interests of simplicity, the employer decides to close the scheme to new entrants from 6 April 2011 to avoid the extra administrative burden, the scheme is then no longer 'open to all employees' and all current members of the scheme will be taxable and NICable in full!
Given the level of your income, it is advisable for you to seek professional advice from your local TaxAssist Accountant to ensure you are making optimum use of all reliefs, schemes and allowances available to you.
By Jo Nockels
Disclaimer: Advice shared in this blog is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this forum, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.