Paying for childcare
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
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
- a childminder registered with Ofsted in England or the CSSIW in
- 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
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.
Please note that Tax credits from April 2013
will start to be replaced by Universal Credits.
HMRC for more information about tax credits,
and to apply online.
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
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
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 15 hours of
free early education 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.
Contact your local early years team to find providers in your
Local authorities have a statutory duty to
provide free early education to disadvantaged 2-year-olds. This is
an extension to the existing entitlement for 3- and 4-year-olds.
Contact your local authority early years team to find out more
about the offer and whether you're eligible to claim. Generally
speaking, families meeting the criteria also used to decide
eligibility for free school meals, and looked after children, will
be eligible for free care for their 2-year-old. This will be around
20 per cent of all 2-year-olds in England, although the percentage
will vary from area to area.
From September 2014 new eligibility criteria will be introducced
so that in total some 260,000 children in England (around 40 per
cent of all 2-year-olds) will be eligible.
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.
To find out more about Universal Credit visit Department for Work and