How Can a Parent Save Over £10,000 on Their Nursery Fees?
It sounds unbelievable. Let's look at the maths.
A saving of over £10,000 — really?
A saving of over £10,000 sounds unbelievable, doesn't it? It is an enormous sum of money — it would cover the cost of a big family holiday to Disneyland Florida, or something else equally expensive. But let's look at the maths, and how realistic this really is.
First things first: to make that kind of saving, your nursery fees have to be considerably more than that. So let's look at a high-end nursery in London that charges a typical £2,400 per month for one child. We are aware of fees much higher than this at very high-end nurseries — we have heard stories of nurseries where you can leave your ironing with the staff and collect it at the end of the day along with your child.
So, £2,400 per month for 12 months = £28,800. A lot of nursery fees — just a little above the minimum wage for a full-time worker, and not a lot less than the median wage in this country currently.
Now let's put this worker on a high salary
Let's say a salary of £125,000. At that income level, with fees of £2,400 per month, the salary sacrifice Workplace Nursery Scheme produces a saving of £14,590 — and here is the full breakdown of exactly how that figure is arrived at.
In Scenario 1 (No Benefit), the parent pays £28,800 in nursery fees from their take-home pay, leaving a final take-home of £49,257.40. In Scenario 2 (Salary Sacrifice), the nursery fees are deducted before tax, dramatically reducing the Income Tax and National Insurance payable, leaving a final take-home of £63,847.80 — a difference of £14,590.40.
And here you can see how the savings are made
This is on one child — we know of people paying this kind of money for more than one child. So the savings are very real indeed.
Note the employer's position too. Despite making a nursery contribution of £1,800, the employer still saves a net £3,168 — profit added directly to the bottom line as a reduction in employment costs. This is because the employer's National Insurance bill falls when the employee's gross pay subject to NI reduces.
If you want to know more about how to get this benefit up and running in your business, please contact us. There is no sign-up fee — you can see from the breakdown above exactly how we earn our money in the transaction. Our fees come from the tax savings made, so you can offer a genuinely valuable benefit to your staff and still come out better off.
Ready to see what you could save?
Use our calculator to find out your personal saving in seconds, or get in touch and our friendly team will walk you through exactly how the scheme works.
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