If you’re working and paying for registered childcare, you may be entitled to some help with your childcare costs.
There are currently two main sources of financial help for working parents: the childcare element of Working Tax Credit and Employer Supported Childcare. Two new schemes to help working parents are being introduced in 2015 and 2017.
Childcare element of Working Tax Credit
The childcare element of Working Tax Credit is intended to help working parents on a low income with the costs of registered childcare. The amount of financial assistance you could receive will depend on your income, your childcare costs, the number of children you have and your family circumstances. To be eligible for the childcare element of Working Tax Credit, you:
• Must be in paid work of 16 or more hours a week. If you have a partner, you must both be in work for 16 or more hours per week; or one of you must work 16 hours and the other is incapacitated, in hospital, in prison or entitled to carer’s allowance.
• You must have main caring responsibility for your child/children; and you can claim for them up to the first Saturday in September following their 15th birthday – or their 16th if they are disabled or registered blind.
• You must use registered childcare.
The childcare element can cover up to 70 per cent of eligible childcare costs. Maximum costs are currently set at £175 per week for one child and £300 per week for two or more children.
So, if you have one child in childcare and you pay £175 a week or more, you could receive a maximum of £122.50. With two or more children in childcare, you could receive up to £210 (70 per cent of £300).
The childcare element of Working Tax Credit is paid to the main carer, alongside Child Tax Credit. You can check what you’re entitled to, and make a claim for the childcare element of Working Tax Credit, by calling the tax credit helpline on 0345 300 3900.
Employer Supported Childcare
Your employer may offer you help with your childcare costs. This can be offered through a variety of schemes that help you, as a parent, save money by not paying tax and National Insurance contributions on some or all of your childcare costs.
Not all employers offer this assistance but, if they do, the amount you save with an employer-supported childcare scheme depends on:
- the type of scheme your employer offers;
- whether this is offered instead of your salary (salary sacrifice) or in addition to your salary (salary plus); and
- the rate of tax and National Insurance contributions on your salary.
You can use these to pay your childcare provider, who will claim the value of the voucher from the voucher company or from your employer, usually by direct payment into their bank account. Some employers administer the scheme themselves; others use a voucher company to run the scheme. Many people receive their vouchers as an e-voucher but you can receive it as a paper voucher.
You can find out more about childcare voucher companies here.
Throughout 2015 - 2017 Universal Credit is being introduced to replace certain benefits. You may be able to claim Universal Credit instead of certain benefits if you’re on a low income, including help with your childcare costs.
Universal Credit is being introduced in stages. When you can claim depends on where you live and your personal circumstances.
You don’t need to do anything if you’re already claiming any benefits – you’ll be told when Universal Credit will affect you.
To be able to claim Universal Credit you'll have to sign a ‘Claimant Commitment’. This is an agreement that you’ll undertake work related tasks; being a parent, with responsibilities at home, will be taken into account.
From spring 2016, the government intends to increase the rate of childcare support in Universal Credit from 70% to 85%.
For more details visit the gov.uk website or contact the Universal Credit helpline on 0345 600 0723.
Tax-Free Childcare Vouchers
A new scheme, called Tax-Free Childcare Vouchers, will replace the existing Employer voucher scheme in 2017 (the exact date has not yet been confirmed). It will be rolled out in stages and will be open to ALL qualifying parents, unlike under the current system, outlined above, where childcare vouchers can only be used by people whose employer offers the scheme.
The new scheme will be open to single parents/couples who work 8+ hours a week (including self-employed) and who pay for Ofsted-registered childcare for a child under the age of 12 (or 16 if the child is disabled).
Eligible families will get 20% of their annual childcare costs paid for by the government up to a maximum of £2000 per child. Maximum eligible costs are set at £10,000 per year per child.
Annual income limits in the new scheme – are set at £2,420 up to £150,000 for a single parent, and from £4,840 up to £300,000 where both parents work. For more information visit.