Help With Childcare Costs
Get £1,000s in universal credit & Tax-Free Childcare
Whether you have a wee tot or big teen, the costs of childcare can be huge. Yet 100,000s of working parents are missing out on £1,000s of help with these costs. Here we list the help that's available so you won't miss out.
Childcare isn't just for little 'uns
The term childcare may conjure up an image of a young child having fun at nursery. But childcare and its eye-watering cost doesn't stop when kids go to school...far from it.
The good news is that many of the schemes offering help with childcare costs cover older kids too.
For tax credits, you're able to claim child tax credit until the 31 August after your child turns 16. You may also claim if they are under 20 and in non-advanced approved education. But note that this only applies to those who are already claiming tax credits, as they are now closed for new applicants – unless you're receiving the severe disability premium. See our Tax Credits guide for more info.
Who is eligible for tax-free childcare and how much can you get?
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 – and for them you can claim up to £4,000). And those still able to use childcare vouchers, can use them until their children turn 15 (16 if they're disabled).
You must use a registered provider
Whether you're paying with childcare vouchers, tax credits or Tax-Free Childcare 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.
Free childcare for three or four-year-olds
There is free early education and childcare available for all three or four-year-olds across the UK (starting from the term after your child's third birthday).
Currently, in England, you're entitled to 570 hours of free childcare a year (see below for rest of the UK). This is usually taken at up to 15 hours a week for 38 weeks of the year. You can stretch it out longer by using fewer hours a week, but many councils want your child to attend for at least 2.5 hours a week.
You can either use this allowance in school term time, or you can usually use it over the entire year. To get it, simply ask your local nursery or childcare provider 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.
Watch out for extra add-ons and potential price rises
You may need to pay for add-ons such as nappies and meals, so in reality your childcare will unlikely be completely free. And many providers have said they have raised prices (or will do so) for paid-for childcare as they look to recoup some of their costs, which they claim is down to the scheme being underfunded.
Free childcare doubled to 30 hours in England for working parents
Parents of children between the ages of three and four can get a total of up to 30 hours' free childcare a week (1,140 a year) – if they work and meet certain conditions.
Councils should have their own cut-off points for application on their websites – typically these are 31 December for the spring term, 31 March for the summer term and 31 August for the autumn term.
To qualify for the extra 15 hours of free nursery, you must earn a minimum of the equivalent of 16 hours a week at the national living or minimum wage (£140/week in the 2020/21 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.
However, a growing number of providers 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. Four in 10 childcare providers say they may have to close in the next year, a half have raised fees, a third are planning to do so and a fifth will introduce extra charges, according to the latest research from the Pre-school Learning Alliance and Mumsnet.
This means what's available to you will likely depend on local factors including: council funding; nursery costs; number of children at the nursery; and how the nursery adapts.
To get the free 15 hours, you just contact the provider, but for the extra 15 hours, you need to apply for the extra hours' free childcare through the Gov.uk website. If you're approved, you'll receive a code to give to your childcare provider. You'll get the extra hours once the next term starts.
If you're not currently using a childcare provider, you can usually find a list on your council's website.
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 August 2020, though some places are already phasing the extra hours in. 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.
To get it, speak to your local authority, or you can contact your childcare provider to see if you can use your free allowance with it. You can also ask another provider if you wish. If you need more help, contact your local authority. You can also use the Scottish Government's Parent Club.
Parents of three and four-year-olds across Wales are entitled to up to 30 hours a week of free childcare, across 48 weeks of the year. You can divide the hours up, but at least 10 hours a week needs to be used on early education and 20 hours on general childcare.
To qualify, you must earn a minimum of the equivalent of 16 hours a week at the national living or minimum wage (£140/week in the 2020/21 tax year), and less than £100,000 a year. This applies to parents in a couple (so each parent must fit the criteria) as well as to single parents.
Before you apply, check that your chosen childcare provider is registered with the Care Inspectorate Wales.
Three and four-year-olds get a funded pre-school education place through the Pre-School Education Programme, available term-time either on a full-time or part-time basis. Full time amounts to 4.5 hours a day (22.5 hrs/wk), and part-time 2.5 hours of free childcare a day (12.5 hrs/wk) for 38 weeks of the year.
To get it, apply through the Education Authority's website to get an application form. You can apply to any number of providers, but it's best to select more than one, as your chosen provider might not have enough spaces available.
You have to supply the form and your child’s birth certificate to your first preference childcare provider by the deadline. You can find all application deadlines on the Education Authority’s website.
Check if you can get benefits to help with childcare costs
In the UK the average cost of sending a child under two to nursery full-time is £242 per week, with part-time coming in at £127 per week. But there are two benefits that can help you pay for childcare – in some cases up to 85% of the cost, 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. Yet if you're a new claimant (or if your circumstances have changed), you'll need to apply for help with childcare costs through universal credit.
1. Working tax credit
If you're already claiming tax credits, you can continue to do so until you need to make a new claim or your circumstances change, in which case you'll have to apply for universal credit.
With working tax credits you can get help with up to 70% of your childcare costs (paid directly into your bank or building society account each week or month).
The weekly max payout for one child is £122.50 or £210 for two or more, though what you actually get depends on your income. If you pay more than this a week, you don't get any more help. For a full and detailed guide to tax credits, see our Tax Credits guide.
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' currently underway and expected to finish in December 2023. You can read more about this in our Universal Credit guide.
You can apply for universal credit before then if you would be better off on it – use our benefits calculator to see what you could get.
2. Universal credit
You can apply for help with childcare costs under universal credit if you are on a low income, no matter how many hours you work. Under universal credit you can get back up to 85% of your costs, to a maximum of £646.35 a month for one child, and a maximum of £1,108.40 monthly for two or more children.
How to apply
You can apply via 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.
You can make a claim up to three months in advance, but you will only get the money after the childcare has been provided.
To read more about eligibility and how universal credit works, see our Universal Credit guide.
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 2017, gives eligible families an extra 20% towards childcare costs. It's slowly replacing the outgoing Childcare Vouchers scheme, which closed to new entrants in October 2018 (it's still available to those who are a member of a scheme, see below for more).
Tax-Free Childcare 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 partner doesn't, you won't be able to take advantage. Tax-Free Childcare is also available to single parents.
The scheme's available until the 1 September after your child turns 11 (or 16 for children with disabilities). See full info in our Tax-Free Childcare guide.
Many parents can save £100s a year using childcare vouchers, which allow you to pay for childcare from your PRE-TAX salary. The scheme closed for new applicants in October 2018, but if you were signed up before then, are with the same employer, and it still offers them, you can continue to get childcare vouchers. For full info, see our Childcare Vouchers guide.
So which one wins? Tax-Free Childcare or childcare vouchers? Well, what works out best will depend 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.
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 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:
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.
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