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Paying for childcare

Money

Paying for your child's care can account for a large chunk of your family income. However, there are ways you can get some extra help if the care you use is provided by a registered person or setting.

Click each heading to read more.

Tax credits

If you have a new baby, or you're responsible for any children under 16, you could claim Child Tax Credit. You can also qualify if you have children aged 16 to 19, as long as they're in certain types of education or training. It is worth calling HM Revenue and Customs on 0845 300 3900 or visiting www.hmrc.gov.uk to find out if you can get help.

If you are eligible, you might be able to qualify for the childcare element of Working Tax Credit. You need to be using registered or approved childcare, but if you are - the childcare element can help with up to 70 per cent of your eligible childcare costs per week, up to a set limit. The actual amount you get will depend on your income. The lower your income, the more tax credits you can get.

Only childcare provided by registered or approved childcarers is eligible for the tax credit. Registered or approved means:

  • a childminder registered with Ofsted in England or the CSSIW in Wales
  • an 8s and over childminder registered on the voluntary part of the Ofsted Childcare Register in England or the Childcare Approval Scheme in Wales
  • a nanny registered on the voluntary part of the Ofsted Childcare Register or the Childcare Approval Scheme in Wales
  • a nursery registered by Ofsted in England or CSSIW in Wales.

You cannot claim the childcare element of Working Tax Credit if the childcare you are using is provided by a relative of the child, even if that relative is registered or approved. A relative of the child means a parent, grandparent, aunt, uncle, brother or sister whether by blood, half-blood, marriage or affinity.

The exception to this is when your child is cared for by a relative who is either:

  • a registered childminder who cares for your child outside of your child's own home
  • a childcare provider, approved under a Home Child Care Providers Scheme in Wales or Northern Ireland, who cares for your child outside of your child's own home, but they must also care for at least one other child who's not related to them.

Visit HMRC for more information about tax credits, and to apply online.

Childcare vouchers

Employers may offer their staff childcare vouchers, the first proportion of which are free of tax and National Insurance contributions each week for both the employer and the employee.

Vouchers are available to parents as long as the childcarer they use is registered or approved. Childcare vouchers can be used to pay for the care of children up to the age of 15 (until 1st September following their 15th birthday) or the age of 16 if they are disabled (until 1st September following their 16th birthday).

This is a clear benefit for you as a working parent. Because you don't pay tax or National Insurance contributions on the first proportion you could save a significant amount each year. And employers could save money too – plus it helps them reduce short-term absenteeism and attract more people back after maternity leave.

The most common way of accessing vouchers is via "salary sacrifice", where you agree to convert a proportion of your salary into vouchers. No tax or National Insurance contributions are paid on the first proportion per week of a salary sacrifice.

There are childcare voucher companies who will administer the scheme on behalf of your employer, and will ensure that the payments are made correctly to your childcarer.

HM Revenue and Customs has an online calculator which help you calculate whether you would be better off using childcare vouchers.

Free education places

All 3- and 4-year-olds in England are entitled to 570 hours of free education. This is usually taken as 15 hours of free early education per week for 38 weeks of the year. This applies until they reach compulsory school age (the term following their 5th birthday). This is known as the free entitlement.

Funded places can be offered by:

  • childminders
  • children’s centres
  • day nurseries
  • nursery classes in schools and academies
  • nurseries on school sites
  • some playgroups and pre-schools

Once their child is 3, families can claim a place from 1 September, 1 January or 1 April. For example, if a child was born in February, they can claim their funded place from the 1 April after they turn 3.

Contact your local early years team to find providers in your area or visit www.gov.uk/find-free-early-education

2-year-old offer

Children who meet certain criteria (listed below) are eligible for 570 hours of early education per year. This is often taken as 15 hours per week during term time.

Funded places can be offered by:

  • childminders
  • children’s centres
  • day nurseries
  • nursery classes in schools and academies
  • nurseries on school sites
  • some playgroups and pre-schools

Once their child is 2, eligible families can claim a place from 1 September, 1 January or 1 April. For example: if an eligible child was born in February, they can claim their funded place from  the 1 April after they turn 2.

Who is eligible?

From September 2014, your 2-year-old will be eligible for a funded place if you claim any one of the following:

  • Income Support
  • Income-based Jobseekers Allowance
  • Income-related Employment and Support Allowance
  • Support under Part VI of the Immigration and Asylum Act 1999
  • The guaranteed element of State Pension Credit
  • Child Tax Credits or Working Tax Creditsand have an annual gross household  income of no more than £16,190
  • Working Tax credit Run-on – paid for 4 weeks after the claimant stopsqualifying for Working Tax Credit.

A child is also eligible if they:

  • are looked after by the local authority
  • have a current statement of special educational needs (SEN) or an education, health and care plan (EHCP)
  • receive a Disability Living Allowance
  • have left care through special guardianship or an adoption or child arrangements order (formerly residence and contact orders).

The criteria relating to Universal Credit will be confirmed by government at a later date. In the meantime, if you are currently receiving Universal Credit please contact your local authority for more information.

How much does it cost?

Early learning for 2-year-old places are free for parents. They are funded by the Government.

If you choose to, you can purchase extra hours in addition to the 570 hours per year (subject to availability at the setting where your child takes up their early learning place.) You should not be asked to pay additional fees, for example for services such as activities or lunchtime meals as a condition of taking up the early learning place.

If you are already receiving child tax credits you should inform HMRC when taking up a funded early education place as it may change the amount you pay for childcare. Find out how to access a funded education place in your local authority at the following website address: www.gov.uk/find-free-early-education

General information about the early learning programme can be found at the following website address: www.gov.uk/freechildcare 

You can also ask your local nursery, playgroup, childminder, children’s centre or primary school whether they offer funded places for 2-year-olds.

Universal credit

Universal Credit (UC) is a new, single payment for people who are looking for work or receive a low income. UC operates using an online system and instead of varied payments for different benefits, claimants will receive one monthly payment. The move to a single, monthly payment is to reflect the world of work, where 75 per cent of all employees receive wages monthly. This aims to smooth claimants’ transition into monthly paid work, encouraging people to take personal responsibility for their finances and to budget on a monthly basis.

UC effectively replaces the childcare element of the Working Tax Credit currently available to low-income families who work at least 16 hours a week. UC provides childcare support even if a parent works just one hour per week. For many low- to middle- income families with young children, a crucial issue is whether it pays to work after covering childcare costs. UC reforms help parents working fewer than 16 hours a week to pay for childcare.

UC is also good news for parents and carers who work irregular or unpredictable work patterns. Support for childcare costs made through the Working Tax Credit didn't work well for those with fluctuating incomes. UC goes some way to addressing this issue as it enables greater flexibility for parents and carers whose costs fluctuate during the month. For example, under UC help with childcare costs will continue for one month after a period of employment ends, meaning parents and carers won’t have to recalculate every time their circumstances change. This should mean that more people make use of formal childcare – good news for parents and for PACEY members.

This video* explains more about Universal Credit. There's even more information at GOV.UK.

*Video by the Department of Work and Pensions. Contains public sector information licensed under the Open Government Licence v2.0.

 

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