Cutting The Cost Of Childcare

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Childcare is notoriously expensive.  In fact, many parents find that childcare is more expensive than either rent or a mortgage.  The good news is that there is government help available.  Here is what you need to know about it.

The main childcare schemes

The main childcare schemes are:

  • Free childcare (up to 30 hours per week)
    • Some two-year-olds can get 15 hours of free childcare per week.  All three- and four-year-olds can get at least 15 hours of free childcare per week.
  • Tax-free childcare
    • You can pay up to £2000 a quarter into an online account.  For every £8 you pay, the government will top it up by £2 to a maximum of £500 per quarter.  If your child is disabled, the bonus goes up to £4 and hence £1000 per quarter.
  • Childcare vouchers/Directly-contracted childcare
    • The childcare vouchers scheme was closed to new entrants on 4th October 2018.  As the rules currently stand, if you were in receipt of them before the scheme closed, you can usually continue to receive them.  Otherwise, you will be directed towards the directly-contracted childcare scheme.
  • Directly-contracted childcare
    • This is exactly what the name suggests.  Your employer contracts a childcare provider and pays them directly to provide services to you.  Technically, this means that your employer decides what childcare provider you use.  In practice, employers are likely to respond to their employees’ wishes.

You can also get tax credits and help towards childcare costs through Universal Credit.

Precise eligibility for each scheme varies according to where you live.  Here is a quick guide to the criteria for England.  You can get more information on the English schemes and the schemes in other parts of the UK by checking the government’s childcare calculator.

General eligibility

For all schemes, the payments are to assist with the cost of approved child care.  This essentially means a childcare provider who/which is registered with the local authority/government in some way.

This could mean home-based childcare but the caregiver would need to be registered with a suitable agency.  It is more likely to mean a registered childminder, nursery or before-/after-school clubs.

All schemes are, effectively, funded out of public money.  This means that one or both parents would need to be eligible for public funds.  As a rule of thumb, if you are a UK national and habitually resident in the UK, then you are almost guaranteed to have access to public funds.

If you are an EU national and have settled or pre-settled status or have applied for either status, then you are very likely to have access to public funds.  If, however, you have any other status, you may not be eligible for tax-funded schemes.  This includes if you are a UK national but not habitually resident in the UK.

Specific eligibility

Your specific eligibility for any given scheme will usually depend on three key factors.  These are:

  • Your employment status
  • Your income (if you have a partner their income will be included)
  • Your child’s age and any special needs

The free childcare (up to 30 hours per week) scheme can be used with any one of the other main schemes i.e. tax-free childcare, childcare vouchers, tax credits and Universal Credit.  The other schemes, however, can only be used individually.  In other words, you can only receive a maximum of two forms of support.  One of these would have to be free childcare.

It is entirely possible to qualify for more than one scheme.  If you do, you would need to pick the one that worked best for you.  You can, however, usually change this if you wish.  If you do, you may be required to provide evidence that you have left the other scheme.

For financial help or advice, please get in touch.

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