Legacy Childcare Vouchers: Employer Rules and NI Savings

Qualifying legacy childcare vouchers remain exempt from income tax and National Insurance within their limits. The employer can save Class 1 NI on the exempt sacrifice, subject to its NI position and Employment Allowance. This exemption has not generally expired under OpRA.

Establish eligibility first

Employees must have joined a qualifying arrangement and had their wages adjusted on or before 4 October 2018. New entrants cannot use this legacy exemption. Employees must not receive exempt vouchers while using Tax-Free Childcare.

A temporary break does not automatically end membership: GOV.UK allows restarting within 52 weeks where the employer remains the same and the employee has not told the employer they are leaving the scheme.

Apply the correct exemption

Assessment	Weekly exempt limit	Monthly exempt limit
Basic	£55	£243
Higher	£28	£124
Additional	£25	£110

Qualifying members from before 6 April 2011 have the £55/week or £243/month limit. Later members require a basic earnings assessment. Do not choose the limit from a Scottish marginal tax rate.

Use the limit for the applicable payment period. £243 per month is £2,916 over twelve months; £55 over 52 weeks is £2,860. These are different period-based calculations.

At 15% employer NI, an eligible higher-assessment employee receiving £124 exempt vouchers monthly produces £223.20 gross annual NI relief. Actual cash savings can be lower because of Employment Allowance and provider costs. Excess vouchers are not automatically exempt.

Distinguish other childcare arrangements

Tax-Free Childcare is a government account arrangement, not employer salary sacrifice. Workplace nursery exemptions have their own requirements, including employer management/financing and qualifying care. A voucher calculation must not be used to assess a nursery scheme.

Contract changes, maternity funding and TUPE situations need an assessment of the actual arrangement; no blanket legal entitlement is asserted here.

Model legacy voucher savings in the employer calculator.

Official guidance

• HMRC childcare exemptions and limits
• HMRC restarting vouchers and Tax-Free Childcare
• HMRC salary sacrifice exclusions