Sending your child to nursery each day can cost parents around £232 a week – on average. And it can cut a big chunk out of your budget. But the majority of people with kids are eligible for help with childcare costs:
Free hours of childcare
All children in the UK aged three to four are entitled to some hours of free childcare. But how many hours you get depends on where you live and whether you’re employed. The free hours must be used within term time at a registered childcare provider eg a nursery, playgroup, or pre-school.
If both parents in a household (or a single parent in a lone-parent household) work, you could be eligible for tax-free childcare – even if you’re self-employed. As long as you both earn at least £131 a week (16 hours at the national minimum or living wage), but no more than £100,000 a year. You aren’t eligible for tax-free childcare if you still receive childcare vouchers from your employer.
The scheme gives parents £2 for every £8 spent on childcare. So you effectively get basic-rate tax back on what you pay. You can get up to £2,000 each year per child until they’re 11 – topping up your £8,000 to a total £10,000. You may be eligible for more if your child is disabled.
Parents need to open and pay money into a childcare account – this is where the government top-up is added. Childcare is paid for directly from this account.
The government stopped new applications for childcare vouchers in October 2018. It has been replaced by the tax-free childcare scheme. However, you can still use childcare vouchers if you applied before October – if your employer still provides them.
The universal credit system has been put in place to make the benefits system simpler. It’s replacing six means-tested benefits, including child tax credit and working tax credit.
If you receive universal credit, you could get help for up to 85% of your childcare costs. But how much you get depends on what you earn. The maximum monthly entitlement is £646 for one child, and £1,108 for two or more children.
You have to apply for this childcare allowance via your online account. You might have to provide a letter from a registered childcare provider, as well as receipts and bank statements to make a claim.
Child tax credit and working tax credit
Universal credit will eventually replace child tax credit and working tax credit.
You can still claim for child tax credit and working tax credit until you have been moved over to universal credit. Or until you have a change in circumstances eg you move house.
This tool can help you check what childcare support you’re eligible for. Generally speaking, the majority of working parents are eligible for some help – and some of those claiming benefits.
The different systems can be confusing, especially with the current changes going on. But they’re in place to make the system more accessible for more people.