Childcare for Working Parents Explained
Did you know that working parents now spend more than the average mortgage on childcare? According to childcare voucher provider, EdenRed, this is now the reality for many families. With the summer almost over and the term-time regime resumed, many parents will be reeling from the burden of additional childcare costs over the school holidays. The Guardian reports that working parents face an £800 bill for summer holiday childcare alone. Working parents on low incomes are the worst hit, as are those working unsociable hours who struggle to find childcare options outside of normal office hours.
A recent survey by children’s charity, Coram Family and Childcare, shows that childcare provision in the UK is inadequate and the cost is rising. Many families miss out on help, simply because the government’s systems are so complex. A recent report by Money Saving Expert states that of the 1.6 million families eligible for tax-free childcare, only about 315,000 are claiming. Availability of nursery places is also an issue – just 57 per cent of councils in England, and 43 per cent of councils in Wales have enough childcare for parents who are working full-time.
Most parents are entitled to some support when it comes to childcare costs. Let’s take a look at what support is actually on offer and how you get it.
Image source: Pacey
Tax-free childcare
If you are a working parent (including self-employed) with a child or children under the age of 12, (or under the age of 17 for disabled children), you can get up to £500 every quarter (£2,000 per year) for each child towards the cost of childcare. If you’re the parent of a disabled child and meet eligibility criteria you could get up to £4,000 per year. Eligibility depends on if you are working, how much you earn, your child’s age and your nationality. Your partner’s employment and income may also affect eligibility if you are living together.
The complexity comes for those parents who receive benefits such as Tax Credits or Universal Credit. Tax credits will stop immediately if you successfully apply for Tax-Free childcare. You will have to cancel your Universal Credit and childcare vouchers if you get Tax-Free Childcare. Check if you would be better off getting tax-free childcare here. How do you get tax-free childcare? You have to apply (see here) and open an online childcare account through the government scheme on GOV.Uk.
If you are eligible and accepted onto the scheme, the government will pay £2 for every £8 you pay for childcare – you pay into the online account and the government tops it up. If you have one child and pay in £8,000, the government will pay in £2,000 (£500 every 3 months). You then use the account to pay your childminder, nursery, nanny, after school club, play scheme or home care agency. Your childcare provider must be signed up to the scheme, so always check if they are registered before confirming a childcare place.
Childcare for 2-year-olds
If you live in England and are a parent on a low income, your 2-year-old can get free early education and childcare. You will need to be in receipt of certain benefits and you and your partner’s combined earnings must be less than £15,400 after tax if you are receiving Universal Credit or less than £16,190 before tax if you are in receipt of Tax Credits. See more about eligibility for this scheme here.
Childcare for 3- and 4-year-olds
Help with childcare costs is available from the government. Working families can get up to 30 hours free childcare in England for 3 and 4-year-old children each week for 38 weeks per year (some childcare providers will let you space out the hours over 52 weeks using less hours each week. To be eligible for 30 hours free childcare for your 3 or 4-year-old, you, and your partner if you have one, must each be working and earning at least £131 on average per week (equivalent to 16 hours at the National Minimum Wage or National Living Wage).
You do not need to use the full 30 hours each week. Equally childcare providers don’t have to offer the full 30 hours to your child. You can claim up to 30 free hours across a maximum of 3 different providers, but not with more than one provider on each day. You might also want to consider the disruptive effects using many different childcare providers may have on your child. It is best to find a childcare provider that will offer the full 30 hours if possible.
Childcare voucher scheme
The Government closed the childcare vouchers scheme to new entrants on 4th October 2018. This means if you are a parent looking to join the scheme in your place of work for the first time, it is no longer an option available to you. Parents already using the scheme can continue to benefit as long as they and their child or children remain eligible. See government eligibility rules for the childcare vouchers scheme here. Be aware that choosing Childcare Vouchers may have an impact on your eligibility for the Child Tax Credit element of Working Tax Credits. However, Childcare Vouchers are usually the best option.
This article does not constitute qualified advice and policy changes over time, so you should always seek professional advice for your own situation. We do not endorse any services linked in this article. You should use your own judgement in engaging 3rd party services.