Help With Childcare Costs
Get £1,000s in tax credits & tax-free childcare
Whether you've a wee tot or big teen, the costs of childcare can be massive. Yet 100,000s of working parents are missing out on £1,000s ... help with childcare costs.
This step-by-step guide to boosting your childcare budget includes tax credits, tax-free childcare, free school schemes and more.
In this guide
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Childcare isn't just for kids
The term childcare conjures up an image of a baby in swaddling cloth being doted over by a kindly nanny. And while that is one element, actually it stretches far wider... any childcare you're paying for includes children of school age too.
School age generally means aged 16, but there are slightly different rules for tax credits and the Government's new tax-free childcare scheme.
For tax credits, you're able to claim the child tax credits up until 31 August after your child turns 16. You may also claim if they are under 20 and in non-advanced approved education. And for tax-free childcare you can claim up to £2,000 per child up to the age of 11 (or 17 for children with disabilities and the sum is up to £4,000).
It must be a registered provider
Whether you're paying with vouchers, tax credits or cash, the key is that the childcare provision is registered and regulated. This includes after school and summer clubs, nurseries, playgroups, nanny, childminder or au pairs.
If you ask, most providers will simply tell you if they're registered but you can find out from your local authority's children's services department or search for your nearest Family Information Service on the Family & Childcare Trust website which should be able to tell you about the provision available in your area.
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Step 1: Free childcare for three or four-year-olds
There are free 'early learning' classes (includes time at a school-attached nursery) available for all three or four-year-olds (starting from the term after your child's third birthday).
Currently, in England, for at least 38 weeks a year you're entitled to 15 hours a week (to be spread over at least three days) – it equates to 570 hours per year. You can either use this allowance in school term time, or you can usually use it over the entire year, meaning you'd get around 11 hours free each week. Ask your local nursery if it has space. You must tell it that you want to take advantage of the free 15 hours when you sign up.
Families with a low income may also get free classes for two-year-olds.
In practice, the free childcare provision for three and four-year-olds is offered at a range of places including Sure Start children's centres, nurseries, pre-schools and childminders – and covers those run by the state and run privately. So if you're paying for childcare, you can swap it for this free provision.
Free nursery childcare doubled to 30 hours in England in September 2017 but beware...
Parents of children who were three years of age on 31 August 2017 have been able to apply for free nursery entitlement of 30 hours per week since September 2017. Councils should have their own cut-off points for application on their websites - typically these are 31 December for the spring term, and 31 March for the summer term.
To qualify for the extra 15 hours of free nursery, you must earn a minimum of the equivalent of 16 hours per week at the national living or minimum wage (currently £125.28/week), and less than £100,000 a year.
This applies to both parents if a couple – so, a couple 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.
However, a growing number of nurseries have voiced concern that a lack of Government funding towards the cost of providing the 30 hours' childcare could mean it won't be delivered.
Cheryl Hadland, founder of Tops Day Nurseries with a string of childcare centres in the south, said: "It costs us £5.08 per child per hour to deliver high-quality childcare and education, but the Government will pay private nurseries [in part of the south] only £4.30 to deliver this.
"Along with many other local nurseries, we'll make a loss on any places provided as part of the 30 hours' free childcare policy."
It has led to fears nurseries could close as the gap between what local authorities pay to nurseries and what it costs them to provide the extra hours grows too wide - and makes their business untenable. Alternatively, costs to parents could rise in other ways, eg, higher bills for extras such as lunches and trips that were previously free.
This means what's available to you will likely depend on a large number of factors local to you including: council funding; nursery costs; number of children at the nursery; and how the nursery adapts its own business model.
Please get in touch with your experience if you're struggling to get the extra 15 hours on offer. Contact us at firstname.lastname@example.org.
I don't live in England. What can I get?
Childcare is a devolved issue, and so far only the Welsh Government – not the Scottish or Northern Ireland Governments – has announced plans to change the existing level of free childcare provision. This is what you're entitled to:
- Scotland. All three and four-year-olds are entitled to 600 hours of free childcare a year. The Scottish government plans to increase this to 1,140 hours/year by 2020. What type of provider is eligible, and when and where you can take your hours, varies by local authority. You can also get help with childcare for your two-year-old if you receive one of the qualifying benefits.
- Wales. During term-time, all three-year-olds and four-year-olds get 10 hours a week of free early education and childcare during term-time. However, the Welsh Government is increasing this to 30 hours across the country by 2020. Around half of local authorities now offer this, but it might not be available across their entire catchment areas, so check first. You can divide the hours - for example, using 10 hours per week for early learning and 20 for childcare.
- Northern Ireland. Three and four-year-olds get a funded pre-school education place, available term-time either on a full-time or part-time basis. Full time amounts to 4.5 hours per day, and part-time to 2.5 hours of free childcare per day.
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Step 2: Grab tax credits
Tax credits are being replaced by universal credit, and are only available to people living in areas where universal credit hasn't yet been rolled out. From the end of December 2018, they will no longer be available to new applicants.
You can use the postcode checker to see if universal credit is available in your area and if you can apply for tax credits.
I already claim tax credits - will universal credit affect my claim?
If you live in a universal credit area and you're already claiming tax credits, you can continue to do so until you need to make a new claim or you've a change of circumstance. You'll then have to apply for universal credit.
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 as part of the 'managed migration', which is starting in July 2019 and is expected to finish in Dec 2023. You can read more about this in our Universal Credit guide.
What are tax credits?
It's a common misconception that tax credits are for the unemployed. Actually, for help with childcare it's the opposite – you have to be in work. The childcare element of working tax credit is designed to help working parents cover some of the cost, so that they still gain by being employed.
The money available can be huge, so it's important to check you're eligible and it's possible 100,000s of families are missing out.
Did you know?
The average childcare tax credit payout is around £60 PER WEEK. That's OVER £3,000 per year!
It's worth knowing it's not officially called the childcare tax credit, its technical name is the childcare element of working tax credit, yet as that's long-winded we've shortened it for the purposes of this guide. Please note it's NOT the same as child tax credit.
So the question is: Do I qualify?
To stand a chance of qualifying for childcare tax credit you must:
Be a single parent working 16+ hours a week, or
Be in a couple both working at least 24 hours a week between you (with one of you working 16+ hours a week)
If that's you, and your total household income's under £46,000, you should DEFINITELY check your entitlement.
Do note, at this point, the most important qualifier for tax credits is where you live, as you can't apply for tax credits if you live in a universal credit. Even if you live in an eligible area, we can't say that you'll definitely qualify. We're only saying it's worth checking if you qualify, not that you do. Having said that, even some with household income above £46,000 may be eligible for decent payouts, especially if you have more than one child, or a disabled child. Also, if either you or a partner are disabled you may not need to work 24+ hours a week between you, however specific eligibility criteria is in place.
For a full and detailed guide to tax credits see the Tax Credits guide.
Childcare tax credit Q&A
If you're entitled to tax credits, it's worth understanding your rights before starting. Don't worry, it's not too complex and, while you will have to fill out forms, there's a helpline to assist you.
Rather strangely the Government has moved away from the internet for tax credits and prefers people to call the tax credit helpline on 0345 300 3900 to see if they're eligible and find out how to apply. The helpline is open every day, including weekends, from 8am to 8pm (although you can also check on the Government's Tax Credits Calculator).
You can currently get help for up to 70% of eligible childcare costs, but there's a limit to the total cost. The weekly limit is £175 for one child, or £300 for two or more. However, you can only get up to 70% of this maximum, though what you actually get depends on your income.
1 £175 £122.50 2+ £300 £210
If you pay more than this per week, you don't get any more help.
It's paid directly into your bank or building society account each week or month.
If you're married or living with someone, then you must put in a joint, rather than single, application for tax credits. You can only put in a single claim if you don't have a partner. If you're a permanently separated couple, then you are counted as a single parent and the payment is made to the child's main carer.
It's any money earned from paid work (or self-employed profits) plus any extra income above £300 you (or a partner) receive from a pension, savings, renting out a property, or things such as a trust or interest in the estate of a person who has died. Overtime only counts if you work the hours regularly.
You don't need to include maintenance money (payment from an ex-partner to help cover the costs of raising your children) or your children's income.
You need to apply before universal credit is rolled out in your area. If it has been rolled out, then you won't be able to put in a new claim.
If your childcare costs go up, call the tax credits helpline and tell them about it, as you may be able to get more money and if you're late you can only backdate it for one month.
If the costs go down, do the same as you're then being overpaid and will have to give the money back, never easy if you've already spent it.
Yes. If you pay more in the summer, your assessment's based on your average year-round childcare costs and that includes summer and other holidays. So add up the total cost for the year and that's what you say. This means you need to try to budget over 12 months. Use the free Budget Planner to help.
If you just pay for care in the summer, you'll only get a payment during that time so contact the tax credit office to tell them as soon as you can.
This benefit is for parents who work over 16 hours a week, so you won't be eligible anymore (unless you get new work). You do need to inform the tax credit office or you could have the money reclaimed at a later date, really hitting your cash flow. The tax credit won't be cut off immediately though, you should get a four-week grace period.
For a generalised check-up of whether you're getting all the help you're due, read the Benefits Check-Up guide
Step 3: Do you qualify for tax-free childcare?
Tax-free childcare is a Government-backed scheme which helps parents with the cost of childcare. The scheme, which launched in April 2017, gives eligible families an extra 20% towards childcare costs. It's slowly replacing the outgoing childcare vouchers scheme, which is closing to new entrants later this year (more on this below).
The scheme is designed so that for every 80p you put in, the state will add 20p – so it effectively gives you basic-rate tax back on what you pay, hence the scheme's name.
In total you'll be able to use the scheme to pay for up to £10,000 of childcare per child each year (meaning you'd pay £8,000) – so you could get an extra £2,000 per child (up to £4,000 if your child is disabled) each year. Once your childcare bill exceeds the Government maximum, there's no more financial support for that year. You can still pay for your childcare through the scheme but you won't get a top-up so it might be easier just to pay your child's nursery etc directly.
It's open to all qualifying parents. This includes anyone who's self-employed. However, you (and your partner, if you have one) will need to be in work to qualify – so if you work and your partners doesn't, you won't be able to take advantage. Tax-free-childcare is also available to single parents.
The scheme's available to parents of children up to and including the age of 11 (or 16 for children with disabilities). See full info in our Tax-Free Childcare guide.
Tax-free childcare won't win for everyone, and many could be better off sticking with childcare vouchers (if you're already a member, if not see the box below) - or the other way round. It all depends on your personal circumstances. But you have to settle for one as you can't apply for both. See full help in our Childcare Vouchers vs Tax-Free Childcare analysis.
The childcare vouchers scheme is now closed.
The childcare vouchers scheme closed 4 October 2018, and has now been replaced by the tax-free childcare scheme.
Those who had received their first vouchers by 23:59pm on 3rd October will be able to still get vouchers as long as they stay with the same employer, and their employer continues to offer them.
If you're considering switching onto the tax-free childcare scheme, read the Tax-Free Childcare guide.
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Step 4. Help with childcare costs through universal credit
You can get help with your childcare costs if you're claiming universal credit. You can get back up to 85% of your costs, to a maximum of £646 for one child, and a maximum of £1,108 for two or more children.
The reimbursements are paid in arrears, so you have to pay for the childcare and it needs to be provided before you can get any money back.
You can apply through your universal credit account on the Gov.uk website. You will need to provide evidence of your costs. This includes a letter from your registered childcare provider, a bank statement proving you've paid your provider, or a cash payment receipt.
How does claiming childcare costs back through universal credit work?
You will be reimbursed through your regular universal credit payments.
You'll need to upload your evidence every month. If you've uploaded all your documents and verification has taken place (if necessary) before the last day of your assessment period, you should be reimbursed on your next universal credit payment date.
You can make a claim up to three months in advance, but you will only get the money after the childcare has been provided.
How does universal credit work?
If you live in a universal credit area, you will need to apply for universal credit rather than the benefits it replaces, including tax credits.You can currently only apply if you've got up to two children.
You can get universal credit if you're on a low income or you're out of work. It's meant to help you get back into work, and how much you get will depend on how much you earn. If you're a working family, you'll have a work allowance - this is the amount you can earn before your universal credit gets reduced.
How much you get depends on your circumstances:
- If your universal credit includes housing support: £198/month
- If your universal credit doesn't include housing support: £409/month
If you earn above these amounts, your universal credit will be lowered by 63p for every £1 you earn.
To read more about eligibility and how universal credit works, see our Universal Credit guide.
Step 5. Free summer holiday activities
Provision of holiday childcare for school-age children is often a real hit to the finances. Parents either need to lose earning power by taking time off work, or pay for professional childcare.
Here's a few ideas to find what's local to you and get you started in finding affordable and entertaining activities for your kids over the holidays:
Contact schools, community centres & youth groups: Usually over the summer, and sometimes during Easter and Christmas, thousands of schemes across the UK offer a range of activities for children, from sports coaching to dance and music sessions. Get in touch with them to find out what's on offer.
Is there a school holiday day camp near you? SuperCamps run school holiday day camps for 4-14 year olds (England only) and have some interesting activities on offer. Or you could try Activate Sport summer camps for children aged 5-16 (also England only). For Scotland, Wales and Northern Ireland, try Netmums to see what's on near you.
Can I pay for summer care with tax credits or vouchers/tax-free childcare?
Researching the above is a safe and cheap way to resolve holiday childcare needs and if you need to pay for it, then often you'll be able to use the schemes above to help:
Childcare tax credits
You may be able to use your tax credits to help pay for your child's summer activities. If you pay for them to attend, whether it's tennis lessons or camp, if the activity provider is Ofsted-registered, you can claim as you would for an after-school club or childminder.
If you ONLY use childcare during the summer holidays, then you will only be able to claim tax credits for the weeks that you're actually paying for childcare. If you use it throughout the year, but costs go up in summer, then you'll need to estimate the average cost during the year, and then use this with the tax credit helpline when claiming (so spreading the cost).
Childcare vouchers/tax-free childcare
You can often pay for summer holiday childcare provision with vouchers or tax-free childcare, although it's best to check before booking that the activity you've picked accepts them – again, it'll need to be Ofsted-registered to do so.
More ways to entertain kids:
For more ideas on how to keep your little ones busy, see the following related guides:
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Can grandparents benefit from childcare?
It's estimated grandparents provide 1.7 billion hours of childcare every year for more than 1.5 million grandchildren. However, they can't be paid for it using childcare vouchers, Tax-Free Childcare or childcare tax credits, as they don't provide regulated childcare.
However, there is a way for some grandparents (and others) to gain. If you care for grandchildren aged under 12, this can qualify for class 3 national insurance credits (known as specified adult childcare credits). These count towards your qualifying years for a full state pension.
If you retired before April 2016, you need 30 qualifying working years to get the full state pension. If you're retiring after April 2016, that's raised to 35 years. (Read our State Pensions guide to find out more about qualifying NI years.)
If you're looking after grandchildren, and you need extra qualifying years, it's worth getting recognition for the childcare you provide. But, it's not quite that simple. You need to claim these credits – they won't be automatically added to your NI record.
For grandparents to be eligible for the national insurance credits, working parents need to give up the NI credits they receive when they claim child benefit and transfer them to the grandparent doing the caring – they're transferable credits.
You also need to time your claims. If you cared for a grandchild in the last tax year, you need to apply in the October after the end of the tax year for the credit to be transferred.
You need to fill in the catchily titled form CA9176 and send it off to HMRC. Both you and the parent transferring the credit need to sign the form.