What is an Earnings cap?
To put it simply, this is the maximum Childcare Vouchers value an employee can sacrifice from their salary. It is largely dependent on the annual salary as well as when they started using Childcare Vouchers.
All employees who have joined the Childcare Vouchers programme for the first time on or after 6th April 2011 are subject to a Basic Earnings Assessment once per annum in order to be assigned an earnings cap.
Employees who have joined the Childcare Vouchers scheme before the 6th April 2011 are not subject to such an assessment and will be marked as ‘N/A’. Such employees can take advantage of the maximum value regardless of their earnings.
When employees are transferred to RG Childcare, we ask for their annual salary in order to calculate and assign an earnings cap to every account.
Earnings Caps for 2019-2020
Please note that the Salary thresholds for the different tax brackets are subject to change and can be checked here.
Once assigned, the limit will be fixed until the start of the next tax year (usually between 1st March and 1st June the following year) when a new Basic Earning Assessment will be due to be assigned.
Annual BEA Recalculations
Every year, employers will be prompted to recalculate their BEAs for the relevant employees.
It is an HMRC requirement and employers must keep proof that they have performed these checks.
For clients using SmartPay™, a new task will appear in their SmartPay™ dashboard upon login in the run-up to the end of the Tax Year.
Clicking on the task will enable clients to view past BEA data, and perform re-checks for each of their payrolls. Clients can apply filters to the list to make it easier to process. To make things even easier, they can complete some of the checks and come back to it later - the system will remember their progress.
Once a client has confirmed all employees, they will be able to submit their new BEAs. We will then update the subscriptions of all employees whose earnings caps have changed, and inform them via email.
Clients without SmartPay™
Clients who are using our basic RG Childcare technology will be prompted to perform their BEA re-checks before they will be able to complete their approvals after the 4th April.
At that point, clients will see a task in their dashboard which will take them to a full listing of staff by payroll to be confirmed or amended as necessary. We will then inform all employees whose earnings caps have changed.
If you’d like more information about Basic Earnings Assessments, please visit the HMRC website.