Child care coasts can make it too expensive for both parents to work in some families, while others may be paying more than they need to. We have some tips that may help you to save a few pounds and find the best way to cut your childcare costs. Please check the figures in the article to ensure you have up to date information – https://www.gov.uk/working-tax-credit/overview
Take the long view
According to the Daycare Trust, the average cost of 25 hours’ care in a nursery for a child under two is £103. However, in England, once your child is three, they are entitled to a state-funded nursery place, which can help dramatically with costs. You can use this entitlement to get a place in a nursery attached to a state primary school, which will usually offer either morning or afternoon sessions.
If this does not fit in with your working patterns, you may be able to use your entitlement at a private nursery that offers longer days, and top it up with your own money for the extra time.
Get your entitlement
As well as the nursery grant mentioned above, some families are eligible for more help with child care. Some families will be eligible for free nursery places from two years old from September 2013, in a scheme that is expected to be rolled out nationally from 2014. The 20pc most deprived families in an area will be entitled to the places. Working tax credits are another source of help for those on low incomes who need to pay for child care. Help is available for working parents of up to 70pc towards the costs of child care up to a maximum of £175 per week for one child and £300 per week for two or more children.
The actual amount you receive will depend on your income and your child care costs. If you are single parent you must work 16 hours or more per week to be eligible for the credit. The child care you use must be registered. To find out if you might be eligible, visit the gov.uk website, which has a calculator.
Know your child care options
Some child care is cheaper than others. At the top of the expense scale come professional nannies and some expensive day nurseries. If your nanny is Ofsted-registered you can use vouchers to pay him or her, which can help the cost. However, not all are, and because you employ him or her you will be liable for tax and for any maternity pay.
Childminders, who are self-employed and look after your children in their own home instead of yours, are often cheaper still.
Vouchers for it
For those whose income is too high to be eligible for tax credits, child care vouchers can help with the cost. These vouchers are taken out of your income before tax and National Insurance, and can then be used to pay for Ofsted-registered child care.
Savings from the vouchers can be large – the maximum a basic-rate taxpayer can save is £930 a year. If you have been in a child care voucher scheme since before April 2011 and are a higher or additional-rate taxpayer you can save even more, £1,225 and £1,516 respectively.
Newer entrants to voucher schemes face a tougher regime. Basic-rate taxpayers are allowed to buy £243 worth of vouchers every month, but higher and additional-rate taxpayers can take less (£124 and £97 respectively), which limits their gains. The maximum annual gains for new entrants paying higher or additional-rate tax are £620 and £600 a year respectively.
Once you have received the vouchers, you can use them to pay for any Ofsted-registered child care for children up to 15, including some summer holiday clubs. You can also set them against some independent school costs, including boarding school fees. Not all employers offer the vouchers, but if yours doesn’t you could try putting the option to them.