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MONEY COMMENT
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The UK's working parents could soon receive more help towards childcare costs, which often account for a large slice of their take-home pay. According to charity the Daycare Trust, the UK has the highest childcare costs in Europe, and they are rising at well above the rate of inflation. On average, working parents should expect to pay £134 a week for a private day nursery, which comes to almost £7,000 a year. Childminders are about a tenth cheaper, weighing in at £121 a week, or roughly £6,300 a year. Nannies are far more expensive: expect to pay £1,000 to £1,700 a month, plus tax and National Insurance Contributions (NICs) on top. Of course, childcare costs are far larger in London and the South East. For example, to place my two children in a local private day nursery for three days a week costs me a whopping £1,300 a month, or £15,600 a year. Gulp! This gobbles up most of my take-home pay. In fact, my wife and I would be miles better off financially if I quit my job to look after our kids, while she went back to full-time work. That's because my wife is the high-flying, well-paid breadwinner, while I scratch a living as a lowly writer (I do it for love of the Fool and its readers)! Many working parents claim the Child Tax Credit and Working Tax Credit, which provide help towards the cost of raising children. However, these benefits are means tested, so you probably won't be entitled to anything if your household annual income exceeds £58,000 (£66,000 if you have a child under one). Nevertheless, next tax year, many working families are expected to benefit from an improvement to the taxation of childcare vouchers, which around one in five firms (20%) currently offer to their staff. At the moment, you do not have to pay 11% NICs on childcare vouchers, so £89 of take-home pay can be turned into vouchers worth £100. The good news is that, from next April, the government will also give income tax relief on the first £50 of vouchers bought each week. For basic-rate taxpayers, this relief is worth an extra £11 a week, or £572 a year. Higher-rate taxpayers (about a tenth of the workforce) stand to gain an extra £20 a week, or £1,040 a year. Overall, giving up £2,600 of your annual salary in return for £2,600 of childcare vouchers (known as 'salary sacrifice') would mean an annual gain of £858 for basic-rate taxpayers, or £1,326 for highly paid workers. What's more, your employer doesn't have to pay NICs on this sum too, which helps to support its admin costs. Childcare vouchers are hugely attractive to me, so I'm going to badger the Chief Fools to introduce a voucher scheme ASAP! I'm also going to ask my wife's company to do the same, as both parents can claim this benefit for the same child. If we take our entire nursery fees in vouchers shared between us, I reckon we could benefit to the tune of nearly £3,800 a year. Crikey! Finally, please note that a formal salary sacrifice agreed with your employer may affect your entitlement to the Working Tax Credit (because the childcare element of the WTC doesn't cover voucher spending), so check with the Inland Revenue to see how your entitlement would be affected. These websites have some more info on childcare: More: Visit our Saving For Children centre | A £250 Free Gift For Your Kids.