Childcare vouchers

If an employee would like to sacrifice part of their wages, for example, for childcare vouchers, or to join a bike-to-work scheme, this is how you would record it in FreeAgent.

Please note that FreeAgent's payroll functionality won't be available if you have an unincorporated landlord or non-UK account type, or if you're preparing your accounts using cash basis accounting.

We’ll use the example of an employee giving up part of their salary to join an employer-provided childcare vouchers scheme.

For example, let’s say that your employee’s basic pay is £2,000 per month and your employee is sacrificing £243 of that towards childcare vouchers. You would enter £2,000 in the ‘Basic Pay’ field and enter £243 in the ‘Salary Sacrifice Deductions’ field. This is because for a salary sacrifice scheme to work, the employee must have given up all rights to that salary, so the salary that they’ve given up doesn’t count towards, for example, mortgage applications.

When you come to pay the nursery or voucher scheme, explain the payment from your FreeAgent bank account as ‘Other Money Out’ as the transaction ‘Type’ and ‘Other Payroll Deductions’ from the ‘Category’ drop-down menu.