Childcare Costs: Help is Out There

It's no secret that childcare isn't cheap, but there is help out there for families. Together with financial wellbeing experts, nudge, we've rounded up what's available and where to find out more about each scheme

Your eligibility for help towards your childcare costs can depend on your circumstances, but it's worth spending some time to check out what's available - you might be surprised how much you can save. Use the Government's handy childcare calculator to better understand what options are best for you and your circumstances. 

Below are a few of the Government's key schemes:

Child Benefit

Who qualifies?

You can get Child Benefit if you're responsible for bringing up a child who is:

• under 16 
• under 20 if they stay in approved education or training

What you'll get

Families can get up to £21.80 a week for their first child and £14.45 for subsequent children, depending on earnings. It's paid every 4 weeks and there's no limit to how many children you can claim for. This can be put towards anything, including childcare. 

Tax Free Childcare 

Tax-Free Childcare offers working parents up to 20% off their yearly childcare costs of up to £10,000 per child paid for by the Government. For example, for every £8 a parent pays into their account, the Government puts in an additional £2, which could mean payments of up to £2,000 per child per year (£4,000 for disabled children).

Who is eligible? 

The scheme is available for:

• Working single parents or couples (both must work) and each earning between £120 a week and £100,000 per year
• Parents with children under 12 years of age, or with a disabled child under 17 years of age
• Self-employed parents are also eligible

The scheme can't be used by those already getting tax credits, universal credit or Childcare Vouchers (see below). You can use it with the 15 hours and 30 hours schemes available for 3 and 4-year-olds.

How does it work? 

Parents do not need to rely on their employers to offer the scheme, as they did with the Childcare Voucher scheme (which ended in October 2018). It works as follows:

• Those eligible need to open an online account through the Government website which they will use to pay childcare costs
• The Government will then top up this account with a 20% contribution (the same as the basic rate of tax), so for each 80p you give, the Government will add 20p, up to a maximum of £2,000 a year per child

The scheme can be used to help pay:

• Registered childminders, nurseries, and nannies
• Registered after-school clubs and play schemes
• Registered schools
• Home care workers working for a registered home care agency

Childcare Vouchers (CVV) 

This scheme is now closed for new joiners as it has now been replaced by the Tax-Free Childcare scheme above, but parents who joined it before it closed can still use it.

Universal Credit

Universal Credit is replacing the following benefits:

• Child Tax Credit
• Housing Benefit
• Income Support
• Income-based Jobseeker's Allowance (JSA)
• Income-related Employment and Support Allowance (ESA)
• Working Tax Credit

Who qualifies?

You'll usually qualify if one of the following apply:

• You're on a low income
• You're out of work
• You have a disability or health condition which prevents you from working

What you'll get 

• Working families who are claiming Universal Credit can claim back up to 85% of their monthly childcare costs, up to a certain amount each month. 
• It will depend on your earnings. Your circumstances are assessed every month and changes in your circumstances can affect how much you're paid for the whole assessment period - not just from the date you report them. 
• The benefit cap may limit the total amount of benefit you receive. 
• If you get tax credits, they will stop when you or your partner applies for Universal Credit - Check how tax credits and Universal Credit affect each other.

Working Tax Credits 

These tax credits are known as the childcare element of Working Tax Credit, a benefit which is gradually being replaced by Universal Credit (see above). If you are a working parent you may be entitled to extra tax credits to help with childcare costs - these can be worth up to £122.50 a week or £210 if you have more than one child. 

Who qualifies? 

You'll usually qualify for extra tax credits to help with childcare if all of the following apply:

• You're responsible for the child
• You work at least 16 hours per week
• The childcare you pay for is registered or approved

What you'll get 

You can get help with up to 70% of your childcare costs - up to certain limits. If you pay childcare for:

• One child, and pay up to £175 per week
• Two or more children and pay up to £300 per week

This means that the maximum help you can get for your childcare is £122.50 a week for one child £210 or a week for two or more children. You won't necessarily get the full £122.50 or £210 a week - the actual amount you get will depend on your income, hours you work and childcare costs. The lower your income, the more tax credits you can get. 

Child Tax Credit 

This is also gradually being replaced by Universal Credit (see above). Child Tax Credit will not affect your Child Benefit. 

Who qualifies? 

• You can only make a claim for Child Tax Credit if you already get Working Tax Credit. If you cannot apply for Child Tax Credit, you can apply for Universal Credit instead.
• You can only claim Child Tax Credit for children you're responsible for.

What you'll get

The amount you can get depends on how many children you've got and whether you're:

• Making a new claim for Child Tax Credit
• Already claiming Child Tax Credit

Help From Your Employer 

It may also be worth asking your employer if they have considered the possibility of providing their own workplace nursery, or workplace nursery places at nurseries nearby. If their arrangement complies with DWP criteria for workplace nursery exemption, you and your colleagues will benefit from savings on your Tax and NI, while your employer will also make savings on Employer NI. Find out more about Bright Horizons workplace nurseries and partnerships.