smallbusiness.co.uk: Helping your business think big

Unfortunately childcare vouchers are classified as employer support, so are not available to sole traders. Neither are they tax deductible as part of the running costs of the business.

However, there is a childcare element to working tax credits for which you may be eligible. This can give up to a maximum of 80p for every £1 you pay out in childcare costs. This is up to a limit of £175 in costs per week for one child and £300 for two or more children. You can find more information on tax credits here.

Also, if you wish to give your staff childcare vouchers, the first £55 a week is free from both tax and national insurance if the qualifying conditions are met. Any associated childcare voucher administration costs you pay are also exempt. According to HMRC, the conditions are that:

a) Your employees can only use the childcare vouchers to pay for childcare that has been registered or approved;

b) The child:
- is a child or stepchild of the employee at whose expense, either in full or in part, the child is maintained; or
- is resident with the employee and for whom the employee has parental responsibility;
- qualifies up to 1 September after their 15th birthday (or 1st September after their 16th birthday if they are disabled); and

c) Your childcare voucher scheme is available to all of your employees where the scheme operates.