How to lower your childcare bill

Workingmums.co.uk explains the main ways you can bring down the cost of your childcare bill.

Children at nursery raising their hands

 

Childcare costs continue to rise. And despite a Government announcement of more ‘free’ childcare for children over nine months over the next two years there are concerns that many childcare providers won’t be able to afford to offer it and that more of them will close in any event, meaning less availability of places. But what if you have a place and want to reduce the cost?  Here we spell out the existing options for reducing formal childcare costs in England. Slightly different rules apply in other parts of the UK.

Universal Credit

There is provision under Universal Credit to get significant support with childcare costs if you are a working parent on a low income. That includes pre-school childcare as well as wraparound care provided by a registered provider. Tax credits such as Working families tax credit and Child tax credit have now been rolled up into Universal Credit [UC] for new claimants. The process of moving people on tax credits to Universal Credit is expected to be completed by 2024.

Entitlement to UC depends on your circumstances and whether you are on a low income. You can claim it if you are unemployed or working and on a low income, if you are caring for a disabled person or if you are unable to work due to ill health or disability. Those claiming UC must have less than £16,000 in savings or other assets [not including your house]. If you co-habit then you need to make a joint claim on your combined income and capital.

You can apply online. Claims only start from the date you have submitted your claim. You will be asked for information about your earnings, other income and capital, who else lives with you, how much your housing costs are, how much your childcare costs are if you are working and whether you have a health condition or disability that limits your availability for work.

The amount of help you get depends on your circumstances, for instance, if you have a child with disabilities.  Universal Credit is made up of different elements which are added together to give your maximum entitlement. Deductions are then made for any earnings, other income and capital you have as well as for any advance payments and you may be liable to the benefit cap.  This will leave you with a monthly amount.

If you have more than two children, you will not receive a child element for your additional children if they were born on or after 6th April 2017, except in very exceptional cases.

If you are working, you can receive help with 85% of your childcare costs through the childcare costs element of Universal Credit. If you are claiming with your partner both of you must be working to get help with childcare costs unless one of you is suffering from ill health or disability, is a carer or is temporarily absent from the household.

If you have one child, you will get 85% of your childcare costs up to a maximum of £950.92 per month. That maximum rises to £1,630.15 per month for two or more children. The cap was significantly raised in this Spring’s Budget and the You may also be able to get help with upfront childcare fees if you are looking to return to work or increase your hours. This is done through the Flexible Support Fund.

For more information, go to Turn2us.org.uk. They also have an online benefits calculator which you can use to find out what help you might be entitled to.

Tax-Free Childcare 

Parents, including self-employed parents, can register for Tax-Free Childcare and the extension of free childcare through the Childcare Choices government website which gives information about the scheme. Tax-free childcare is available for approved childcare only. Parents who earn under £100k and at least the equivalent of 16 hours a week on the National Minimum or Living Wage each are eligible as long as they aren’t receiving Tax Credits, Universal Credit or the now suspended childcare voucher scheme [which is only available to parents who signed up before October 2018]. If you’re self-employed and started your business less than 12 months ago, you can earn less and still be eligible for Tax-Free Childcare. The scheme is open to children under 12 (or under 16 if they are disabled). The government says that for every £8 parents pay into an online account, the government will add an extra £2, up to £2,000 per child per year [£4K for children with a disability] or £500 every three months.

Tax-free childcare takes the place of the old childcare voucher schemes offered by some employers which allowed staff to claim back the tax on their childcare costs. The aim was to ensure more parents could access this discount. Some parents have chosen to continue with the vouchers as they work in their favour financially.

Up to 30 ‘free’ hours of childcare a week

Eligible parents can claim up to 30 hours of ‘free’ childcare for eligible three and four year olds for 38 weeks of the year through an Ofsted-registered childcare provider. Some disadvantaged two year olds can get up to 15 hours of funded early education until the term after their third birthday.  Childcare campaigners say the costs of the ‘free’ places are not fully covered, meaning access to places can be patchy, nurseries have to charge for extras or put up the costs for other places or may be forced to close.

The 30 ‘free’ hours for three and four year old children living in England are available to parents who work over 16 hours a week – whether on an employed or self-employed basis – and earn the national minimum wage, but under £100,000 a year. All families in England can access 15 ‘free’ hours of childcare for 38 weeks when their children reach three or four. These can be used flexibly with one or more childcare provider and  some providers allow parents  to ‘stretch’ the hours over 52 weeks, using fewer hours per week.

The Childcare Choices website includes a Childcare Calculator so parents can check what childcare support works best for their families.

Other ways to reduce childcare costs include nanny shares, where you share the costs of a nanny with another family.



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