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help with childcare costs

3 ways to get help with childcare costs



Childcare is one of those astronomical expenses that we don't really consider until we start to need it. At which point, we gasp for breath and rub our eyes in disbelief. But worry not, there are three ways to get help with childcare costs.

Thousands of families are missing out on thousands of pounds worth of help with their childcare costs.

The cost of childcare in the UK is among the most expensive in the world, and is one of the biggest grumbles for working parents. In fact, it can be so expensive that for some the cost of childcare outweighs the benefits of returning to work. But thousands of families are missing out on thousands of pounds worth of help with their childcare costs. Boost your childcare budget with:

1. Childcare tax credits

2. Childcare vouchers

3. Free childcare for three and four year olds

Tax credits for childcare

If you work but are on a medium to low income, you could get up to 70% of your childcare costs back through something called the Working Tax Credit.

Who qualifies for childcare tax credits?

  • To qualify, you and your partner (if you have one) must both work 16 hours or more per week. Some exceptions apply.
  • There is no set income limit for claiming, although generally speaking those earning a combined household income below £42,000 will probably benefit most.

If this describes you, make sure you check to see what help with childcare costs you may be entitled to - it could make a huge difference to your family finances!

How much could I get?

It depends on your circumstances. You could receive up to 70% of your childcare costs, up to a certain limit.

  • For one child, the maximum you can claim for is £175 a week (for two or more children the maximum claim is £300 a week).
  • So the most you could receive in help is £122.50 a week for one child (70% of £175), or £210 a week for two or more children (70% of £300).
  • If you have a large family (or a disabled child) the income limit could be higher.

Of course you might not qualify for the highest amount - but the average tax credit payout for childcare is around £60 per week, which is still a big help.

The easiest way to find out how much you are due is to use HMRC's Tax Credits Calculator.

How do I apply?

You will need to use registered or approved childcare in order to be eligible for the childcare element of tax credits. (In other words, you can't get childcare tax credits if your son or daughter is being looked after by family or friends).

To find out whether your provider is registered or to find a registered provider in your area contact your local Family Information Service.

It is important to make a claim as soon as possible, as tax credits can only be backdated for three months.

Contact the Tax Credit Helpline (0845 300 3900) to request a form.

Childcare vouchers

Childcare vouchers are a really useful way to get help with childcare costs, but a lot of people aren't even aware they exist. You apply for them through your employer (providing they have a voucher scheme) - which can be very worthwhile as they can save families as much as £1,800 a year on childcare costs.

Who qualifies for childcare vouchers?

  • Any working parent with a child aged up to 15 can apply, as long as their employer offers a voucher scheme.

Most voucher schemes work on a 'salary sacrifice' basis. What this means is that employers deduct some of your salary for childcare vouchers every month out of your salary before tax, which means you make a significant saving.

How much could I save?

Childcare vouchers allow you to avoid paying tax on your childcare costs. This doesn't sound like much, but actually the savings can be pretty hefty. Let's take an example:

  • If you gave up £2,000 of your pre-tax salary (worth around £1,400 after basic rate tax), you would get £2,000 worth of vouchers to spend on childcare - saving you £600 than if you'd paid for £2,000 worth of childcare in cash.
  • If you pay basic rate tax, you can claim vouchers up to the value of £55 per week or £243 per month - so if you use the full amount, you could save around £900 in tax and national insurance payments a year.

Remember both parents can sign up - which means a family could save as much as £1,800 a year on childcare.

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There are however some restrictions on higher rate taxpayers.  Higher rate earners who joined the scheme on or after 6 April 2011 can buy £28 per week, while additional rate earners can buy £22.

How do I apply?

Both you and your partner can sign up for vouchers and use them to pay for registered childcare. Most nurseries and pre-schools accept vouchers, as well as many registered childminders.

Be aware! One possible drawback is that you won’t be able to claim for tax credits to help with any childcare costs that are paid for with vouchers.

So in some cases you may be better off not using vouchers, and making a claim for tax credits instead. It will depend on your income.

There’s a useful childcare vouchers versus tax credits calculator online which will work out which option will save you the most money.

From September 2015: The government are introducing a new system to replace employer childcare vouchers from September 2015. Under this new system, you will be able to claim up to 20% of your annual childcare costs - up to a maximum of £2,000 per child - back from the government. Read about the new scheme here. (You can still choose to get vouchers from your employer if you prefer, however).

Free nursery care

Children aged three and four are entitled to free childcare of up to 15 hours per week, for three school terms a year. This is available at a variety of nurseries, day care centres, playgroups and even through childminders.

Who qualifies for free nursery care?

  • All three and four-year-olds are entitled to 15 hours free nursery care a week.

How much could I save?

It varies according to where you live - for example the average cost for a part-time nursery place in London currently stands at £126 per week, while in the West Midlands the average cost is £86 a week.

Some childcare providers will let you compact these hours into two full days, while others only offer morning or afternoon places.

How do I apply?

For more information about free nursery education in your area, contact your Family Information Service.

Other benefits available

If you are on a low income, other benefits and tax credits may be available to you which you can use to help pay for childcare. There is additional help for parents in education too. Visit www.direct.gov.uk to find out more.





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