HMRC have issued new guidance for employer supported childcare in which they have simplified the Basic Earnings Assessment.
The previous guidance instructed employers to use the relevant tax code to calculate the level of an employee's personal allowance for the tax year. In the new simplified guidance it states that employers can use the standard personal allowance in all cases other than for those employees liable to the additional rate on their income from that employment.
Depending on the level of the relevant earnings, for the tax year 2011-12 tax relief is available on the following amounts as follows:
- not exceeding £42,475 - up to £55 per week
- greater than £42,475 but less than £150,000 - up to £28 per week
- £150,000 or more - up to £22 per week.
The amounts in the first two bullet points represent the standard personal allowance for 2011-12 plus the income tax band for the basic rate and higher rate for 2011-12 respectively. The final bullet point features only the additional rate band as there are no personal allowances at this level of income.
You can access a copy of the Employer Supported Childcare guidance here