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Help with my childcare costs

Childcare can be expensive but there is help available towards the costs of childcare. This guide covers the various support options that may be available to you. For information about the additional support available if your child has a special educational need or disability, check our 'Guide to childcare for children with special educational needs and disabilities in England'.

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Working tax credit

Working Tax Credit and Universal Credit are paid to people in work to top up low wages. Working Tax Credit is gradually being phased out and replaced by Universal Credit.

Working Tax Credit can include a childcare element, which gives help to parents with childcare costs. The childcare element of Working Tax Credit can pay up to 70% of eligible childcare costs up to set weekly amounts.

Eligible childcare costs are set at £175 per week for one child and £300 per week for two children. This means you could receive up to £122.50 per week with one child in childcare, or £210 for two or more children. The amount you are awarded will depend on your family circumstances.

To be able to claim the childcare element of Working Tax Credit, you must:

  • be aged from 16 to 24 and have a child or a qualifying disability, or be 25 or over, with or without children
  • use registered childcare; and
  • be working at least 16 hours per week. If you are part of a couple, you must both be working at least 16 hours per week. If one of you is in hospital, prison, incapacitated or on Carers Allowance, the other parent must work at least 16 hours per week.

For all enquiries about tax credits including details on who can claim and any change in circumstances you need to inform the Tax Credits office about, visit: www.gov.uk/working-tax-credit/overview or call the Tax Credit Helpline on 0345 300 3900.

Universal credit

Universal Credit is a new benefit paid to people who are not working or working to top up low wages. It will gradually replace a number of benefits, including Working Tax Credit.

Universal Credit can include a childcare element, which gives help to parents with registered childcare costs. The childcare element of Universal Credit can pay up to 85% of eligible childcare costs up to set weekly amounts.

Eligible childcare costs are set at a monthly limit of £760.42 for one child and £1303.57 for two or more children. This means you could receive up to £646.35 per month with one child in childcare, or £1108.04 for two or more children. The amount you are awarded will depend on your family circumstances.

To be able to claim the childcare element of Working Tax Credit, you must:

  • use registered childcare
  • be in paid work. If you are part of a couple, both members of that couple have to be in paid work. There is an exception to this where one member of the couple is not working and is unable to provide childcare themselves because they are incapacitated, a carer, or absent from the household

For all enquiries about universal credit including details on who can claim and any change in circumstances you need to inform, go to www.gov.uk/apply-universal-credit or call the Universal Credit helpline on 0345 600 0723.

Childcare vouchers

Many employers offer help to their employees through childcare vouchers. These are provided to you by your employer (often through a childcare voucher company), and you can use these to pay for some of your childcare. Your childcare provider claims the value of these back from your employer or the voucher company. Parents receiving childcare vouchers can save up to £55 per week if they are basic rate taxpayers.

If your employer offers these, you may be able to make savings through a reduction in the amount of tax and National Insurance Contributions (NIC) you pay on your childcare costs. Your employer also saves on NIC.

Childcare vouchers will be phased out from 2018 and if you are planning to have more children, it is worth getting advice on the merits of entering the voucher scheme.

Tax-free childcare

Tax Free Childcare will be introduced in 2017. Parents will be able to set up an online account where they can bank payments for childcare.  For each £8 a parent pays in, the Government will add an additional £2 up to a maximum of £2,000 per year per child. Families of disabled children receive help with their childcare costs to a maximum of £4,000 per year.

Tax Free Childcare is being rolled out gradually and will eventually cover all families with children under 12, if they meet the required work and income criteria. There will be an upper income limit per parent of £100,000 to qualify, and a minimum weekly income level per parent equivalent to 16 hours worked at the National Living Wage. 

Free childcare and education

Some two year olds and all three and four year olds are entitled to free early education and childcare. Early learning and childcare gives children the chance to explore the world around them, make friends, socialise, and be ready for school. It also gives parents a chance to work, study, get things done at home or just have a break.

There are different systems for early education in England, Scotland and Wales.

England

Some two year olds and all three and four year olds in England can get 570 hours of free childcare, the equivalent of 15 hours a week for 38 weeks of the year. From September 2017, some three and four years olds will be entitled to an additional 15 hours per week for 38 weeks of the year.

Some nurseries may allow parents to spread fewer hours a week across the whole year. The free hours can be used at most schools and nurseries in the private and voluntary sector, or with a registered childminder.

Parents should not be charged for these free hours. Parents cannot be forced to take up additional hours, or pay for extras but you can choose to pay for more time if you need it.

Eligibility for three and four year olds: All children can take up 15 free hours in the term following their third birthday. From September 2017, three and four year olds will be entitled to 30 hours of free childcare if:

  • both their parents, or one parent in a lone parent household, are in work
  • and each parent earns at least the equivalent of 16 hours work at national minimum wage and less than £100,000 per year

Eligibility for two year olds: Parents can take up these free hours if your family is claiming specific benefits such as Disability Living Allowance or certain tax credits and have an annual salary of £16,190 or less. Two year olds are also entitled to a place if they’re looked after by a local council, have left care (under a special guardianship order, child arrangements order or adoption order) or they have a current statement of special education needs (or an education health and care plan).

To check whether your child is eligible for a place or if you need further advice or information about the free places, speak to your local authority Family Information Service.

Scotland

Some two year olds and all three and four year olds in Scotland can get 570 hours of free childcare per year, the equivalent of 15 hours a week for 38 weeks of the year. By 2020, all three and four year olds will be entitled to 1140 hours per year of early education.

All three and four year olds are eligible for this early learning and care. Some two year olds will be eligible if:

  • they are looked after under a kinship care order, or with a parent appointed guardian
  • their parent is in receipt of Income Support, Jobseekers Allowance (income based), Employment and Support Allowance (income based), Incapacity or Severe Disablement Allowance, or State Pension Credit.

Wales

All three and four year olds in Wales can get 10 hours a week of free early education for 38 weeks a year.

In future, working parents of 3 and 4 year olds in Wales will be able to get 30 hours a week of free early education and child for 48 weeks of the year. Parents in some pilot areas will already be able to get this. Contact your Family Information Service to find out whether it is on offer in your area.

In some areas, two year old children will also be able to get 12.5 hours per week of early education for 39 week a year. Contact your Family Information Service to find out whether it is on offer in your area.

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