April 25, 2024
Finance

UK childcare costs and financial support for parents


UK childcare costs are among the highest in the developed world. Last year, the chancellor announced new support for parents that takes effect in April.

Here we explain what support is available to parents who want help with childcare costs and how to claim it.

In this article, we explain:

Watch the video below for our three top tips on how to ease the financial strain of childcare.

Vimeo – https://vimeo.com/user72881311/review/374780749/2382b7d4ee

How expensive is UK childcare?

Make no mistake about it, childcare is eye-wateringly expensive and the cost is rising.

According to the children’s charity Coram:

  • Full-time nursery for a child under two = £13,400 per year on average
  • Full-time place for a three year old costs = £5,100 per year on average

How much does the government give for UK childcare?

In his 2023 spring budget statement, chancellor Jeremy Hunt announced measures to help tackle spiralling childcare costs.

Currently, working parents with three and four-year-olds are eligible for 30 hours of free childcare per week. Soon, however, this scheme will be extended.

From April, working parents of two-year-olds will be able to access 15 hours of free childcare per week. This will then be extended to working parents of nine-month to two-year-olds from September 2024.

From September 2025, all eligible working parents of children aged nine months up to three years will be able to access the full 30 free hours per week.

This policy change will only apply to households where all adults in the household work at least 16 hours. The provision also only applies within term-time, so 38 weeks of the year.

The government will also pay working parents on universal credit their childcare support upfront. These families will also now be able to claim £951 for one child and £1,630 for two children.

You can find out more about the government schemes below:

These include:

What is the tax-free UK childcare scheme?

Many working parents take advantage of the tax-free government funded childcare schemes available to help with childcare costs. This includes:

  • nurseries, childminders, and nannies
  • after school clubs and play schemes

Under scheme, the government gives you financial support worth £2 for every £8 you pay for childcare up to a maximum of £2,000 per child per year.

The money is paid via an online childcare account that you set up for your child. You need to check that your nursery provider or childminder is signed up to the scheme.

If your child is disabled, this figure goes up to £1,000 every 3 months, up to £4,000 a year. Children qualify until they are 11 years old.

Am I eligible for tax-free childcare?

Your eligibility is determined by a number of factors:

  • whether you (and your partner – if you have one) are working
    • working parents can usually receive it if they are in full time or part time work, on sick leave or annual leave or on shared parental, maternity, paternity or adoption leave
  • your income (and your partner’s income)
    • You (and your partner) will need to earn t least the National Minimum Wage or Living Wage for 16 hours a week on average
    • Both parents must each earn less than £100,000 a year, including bonuses
  • the age of your child and their circumstances
    • Your child must be 11 or under
    • They must usually live with you
  • your immigration status

You are not eligible for Tax-Free Childcare at the same time as claiming:

  • Working Tax Credit
  • Child Tax Credit
  • Universal Credit
  • childcare vouchers

Use the government’s childcare calculator to work out which type of support is best for you and your child.

Find out more about how to manage your money with a fast-growing family here.

What about free UK childcare for 3 and 4 year olds?

You could also get free childcare, just for three and four year olds in England only.

This is another government scheme which starts from the term after your child’s third birthday:

  • All 3 to 4-year-olds can get 570 free hours per year
  • It’s usually taken as 15 hours a week for 38 weeks of the year
  • You can choose to take fewer hours over more weeks
  • You may still have to pay for additional costs like meals or nappies

Again, this is applied for with an online childcare account: register for the code and give it to your childcare provider. Eligibility is very similar to tax-free childcare:

  • It must be through an approved childcare provider
  • You need to be working
  • You need to earn less than £100,000 a year
  • If one partner does not work, you will not be able to get the full 30 hours, but will still qualify for 15 hours
  • You will not be eligible if your child does not usually live with you

NOTE: It is up to your childcare provider how they interpret the scheme. Some may not even offer the free hours, while others may charge for additional expenses. Start your search as soon as possible.

Other private schemes and discounts

You may get a helping hand from the childcare providers themselves. Nurseries may offer discounts. The most common kind is if you send more than one child.

If your are employed, check whether your company offers extra support or perks. For example, extra days off for child-related emergencies, or free emergency childcare when your child is ill or your child-minder is off sick. 

There may also be cheaper childcare provider solutions available. This could include:

  • subsidised nursery at your workplace
  • community nurseries
  • child-minders
  • nanny share – a friend or a nanny that looks after their own child as well as yours
  • au pairs – covering some of their living expenses can help subsidise costs

It can also be useful to find other parents in the same boat for rotas and after-school playdates to ease the load.

Also, although not necessarily a cheaper option, there are now apps and online services that can provide last-minute childcare if you really get stuck.

You may also be entitled to child benefit, which is money paid to parents and guardians by the government to help with the cost of raising their children.

5 more ways to cut the cost of childcare

1. Local community resources

Check with your local authority to see information about childcare and children’s activities in your area. 

Many boroughs will have children’s centres that host weekly activities. Most run over term time, but there should be some events in the holidays.

These activities may include “stay and play” sessions, and gardening and cooking clubs. They will either be free or you may be charged a small fee.

Check local Facebook pages, church halls or the website of your local authority for details. 

2. Childcare pooling

Parents could team up to share childcare.

Some might take it in turns to look after the children for a certain number of hours. Others prefer to all be in one place at the same time, with parents taking it in turns to work from another room.

3. Grandparents or family members 

About a third of British grandparents help with childcare, averaging about 10 hours a week, according to Coram.

Grandparents providing childcare for grandchildren under the age of 12 may qualify for national insurance credits that could give their state pension a boost. 

It is estimated that thousands of grandparents are not aware they can claim credits, missing out on the chance to boost their retirement income. Find out more on the government’s website here.

4. Flexible working 

You may be able to start and finish work at times that suit you, potentially reducing the childcare hours needed.

Some organisations support term-time working, meaning parents do not have to find childcare for the school holidays.

5. Get your child benefit

Don’t forget child benefit is paid to parents and guardians to help with the cost of raising children. 

For the 2022-23 tax year, the rates are:

  • Eldest child or only child: £21.80 a week
  • Subsequent children: £14.45 a week

If you or your partner earns more than £50,000, you may have to pay some of the benefit back. If one earns above £60,000, you lose all of the benefit.

Got a question for our mentors? Drop us an email and we’ll get it answered.

Important information

Some of the products promoted are from our affiliate partners from whom we receive compensation. While we aim to feature some of the best products available, we cannot review every product on the market.



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