From April 2005 all parent employers of nanny's regardless of income will be able to take advantage of the Employer Supported Childcare Voucher Scheme. The scheme offers attractive tax relief to parents (up to £2000 per household) giving a substantial saving on childcare costs.

Childcare vouchers are simply another way of paying your nanny. As an employer of a nanny you and/or your partner are able to earn £55 per week deduction free as long as that money is used for childcare.

There is a process to go through to be able to use Childcare Vouchers. You need to be employed and your employer needs to be affiliated to a childcare voucher company. Your nanny also needs to be approved by an approvals body before she can start accepting the vouchers.

Once set up, the process is fairly simple to run. Your employ deducts at source part of your income which is then turned into vouchers. These vouchers are usually sent directly to you and are then used to pay an amount of your nanny's net wage.

At DomesticPaye we advise that you contact your employers HR department as a first base to ensure they offer a Childcare Voucher scheme. If they do then that's probably the biggest hurdle overcome leaving you to register your nanny then start earning money tax free.

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