Childcare Costs - What Help is Out There
Childcare costs
Childcare can become very expensive, however many are not aware of how the government and employers can help the situation.
Get an estimate from the Gov.uk childcare costs calculator regarding how much you could get to help pay for approved childcare.
How much you can will depend on your income, the hours you work and how much your childcare costs are.
Working Tax Credit
It is well worth checking if you’re eligible for the childcare element of working tax credit, as it can cover up to 70% of your childcare costs.
You can apply if:
You/ you and your partner work at least 16 hours a week
You pay for registered approved childcare
Check here for the Working and Child tax credits, child benefit and guardians allowance for 2017/18.
Free early years education and childcare
In England, all 3-4 years old’s are entitled to 570 hours of free education and childcare annually and you can get it from the first term after your child’s 3rd birthday.
From September 2017, you may be able to get up to 1,140 hours free education and childcare annually; if you are eligible you can register on the gov.uk website to get a code which you can then give to your childcare provider.
You are only eligible if both parents work at least 16 hours a week earning the national minimum wage or living wage and earns less than £100,000 a year.
Depending on what benefits you claim and disabilities, 2 years can also be entitled to some free education and childcare.
These hours can be used at Ofsted registered childcare providers, for example, nurseries, registered childminders and playgroups.
Direct payment for childcare
Also known as ‘directly contacted childcare’, these are payments from your employer to your registered or approved childcare provider.
Without you paying tax or National Insurance, your employer can pay up to:
£243 a month if you pay the basic tax rate of 20%
£124 a month if your pay the higher tax rate of 40%
£110 a month if you’re an additional rate taxpayer – 45%
If your employer pays you more than this, you will have to pay tax on it unless you earn less than £8,500 a year.
Childcare vouchers
These are given to your Ofsted registered childcare provider by your employer. They may be given as a benefit, in which case you give up some of your pay (a ‘salary sacrifice) in return for childcare vouchers, which are usually non-refundable.
Your child must be under 15 years old and are eligible until the 1st September following their 15th birthday. For disabled children, this is 16 years old.
Without you paying tax or National Insurance, your employer can give you the following amounts of childcare vouchers up to:
£243 a month if you pay the basic tax rate of 20%
£124 a month if your pay the higher tax rate of 40%
£110 a month if you’re an additional rate taxpayer – 45%
If your employer gives you extra vouchers, you will have to pay tax on it unless you earn less than £8,500 a year.
Workplace nurseries
These are nurseries set up by employers at your place of work or at another location.
This is tax-free, whether you pay for it or if it is free.
Tax free childcare scheme
Under the new scheme, you’ll get 20% of your yearly childcare bill paid for by government.
This means that for every 80p you pay in childcare, the government will put in 20p.
It’s due to be rolled out to all eligible parents by the end of the year.
Children under 12 years old are eligible and disabled children under 17 years old are also eligible.
There is a list of criteria for parents to meet in order to qualify for the scheme which can be found on the gov.uk website here
You’ll pay into an online account to cover your childcare costs.
The government will then top up your account with a 20% contribution (the same as the basic rate of Income Tax).
The maximum the government will contribute is £2,000 a year per child, or £4,000 for disabled children.
For more information on child care costs and the help you may be able to receive, contact us and we will get back to you with relevant information.
Disclaimer – this information is correct at the time of publication and is provided as general information not to be relied upon without a discussion with a suitably qualified professional.