How To Save Money On Childcare
How Can I Save Money on Childcare?
Any working parent knows that childcare costs can soon rack up to thousands per year, but many aren’t clear on the help that is available towards these costs. This guide aims to explain the different options available to help working parents with childcare costs.
Free Childcare for Three and Four-Year-Olds
In the UK, all three and four-year-olds are entitled to free early-years education, which becomes available to you from the term after your child’s third birthday.
Universally, parents in the UK are entitled to 570 hours a year of free childcare (usually taken as 15 hours per week for the 38 weeks, in line with school term dates). Some councils and childcare settings will allow parents to extend the allowance beyond the 38 weeks by using fewer hours per week, but this will depend on your council and childcare setting.
To take advantage of these free hours, you need to find a childcare provider that has space. It’s important that you make them aware you want to use the free 15 hours, as many of them will only have a certain number of these places available.
Families with a low income and/or on certain benefits may also get free classes for two-year-olds. Visit gov.uk/help-with-childcare-costs/free-childcare-2-year-olds to check if you’re eligible.
30 Hours’ Free Childcare
Some parents of three and four-year-olds can double their free childcare allowance to a total of 30 hours a week (1140 hours a year), providing they meet certain criteria.
To qualify for these extra hours, you must earn a minimum of the equivalent of 16 hours a week at the national living or minimum wage (£131.36/week in the 2019/20 tax year), and less than £100,000 a year. This applies to both parents in a couple – so, a pair each earning £99,999 would still get the extended 30-hour allowance. But, if one parent doesn’t work, your child would only get 15 free nursery hours.
You need to apply for the extra hours’ free childcare ahead of the next term (each council will have its cut-off date, so check locally) through the Gov.uk website. Once approved, you’ll receive a code to give to your childcare provider.
As with the 15 hours, you need to find a childcare setting that has space for you.
Benefits to Help with Childcare
There are two benefits that can help you pay for childcare, but you can claim only one of them. This is because the new system of ‘universal credit’ is replacing the old system of ‘working tax credit’.
If you’re already claiming the ‘childcare element’ of working tax credit (and your circumstances haven’t changed), you can continue to do so. With working tax credits you can get help with up to 70% of your childcare costs, depending on your income.
If you don’t need to make a new claim, and you don’t have a change of circumstance, you’ll be moved over to universal credit. You can apply for universal credit before you are moved over, if it would be better for you.
Under universal credit, those on a low income can apply for help with childcare costs, no matter how many hours you work. You can get back up to 85% of your costs, up to a maximum of £646.35 a month for one child, and a maximum of £1,108.40 monthly for two or more children. To apply, visit the www.Gov.uk website.
Tax-Free Childcare
Tax-Free Childcare is a Government-backed scheme which helps parents with the cost of childcare. The scheme is slowly replacing the Childcare Vouchers scheme and runs through an account into which the government will pay 20p for every 80p you pay on. This equates to 20% off your childcare costs, and you can use the scheme to pay for a maximum of £10,000 of childcare per child per year (at a cost of £8000 to you).
This scheme is available working parents, including the self-employed, until your child is 11 (or 16 if your child is disabled). If you and your partner live together, you must both be working.
Childcare Vouchers
If you work for a company that still offers Childcare Vouchers and you signed up for them before the introduction of the tax-free scheme in October 2018, you should weigh up both schemes to see which is of most benefit to your personal circumstances. This will depend on how much you earn and how much you spend on childcare.
Older Children
Many of the schemes offering help with childcare costs cover older kids too.
If you’re already claiming tax credits, you can do so until the 31 August after your child turns 16 (if they’re under 20 and in non-advanced approved education, you can continue to claim).
With Tax-Free Childcare, you can claim up to £2,000 per child until the 1 September after your child turns 11 (or 16 for children with disabilities). If you’re still able to use childcare vouchers, you can use them until your child is 15 (16 if they’re disabled).
This means that you’ll be able to pay for some registered holiday, breakfast and after-school clubs with childcare vouchers, tax credits or the tax-free childcare scheme.