The cost of childcare can be huge; for many parents, it is one of their biggest expenditures. Paying thousands of pounds every single year can take a huge chunk out of the annual finances, but the idea of giving up work might be something that you cannot, or do not want to, entertain. At the end of the day, you are not going to need to pay huge sums of money for childcare forever, and maybe you do not want to be a stay-at-home parent. But is there a way that you can lower your childcare costs? Yes, there is, and this simple guide will try to show you how.
A number of government schemes are available that can help to lower your childcare costs quite substantially, so it is worth checking them out. For example, depending on when you are reading this content, you could take advantage of the childcare voucher scheme. This scheme remains open to new applicants until 5th April 2018. After that, it will stop accepting new applicants but those already on the scheme can continue receiving childcare vouchers.
You should also check if you are eligible for free childcare for your two-, three-, or four-year old. Provided you meet certain criteria, you could be eligible for a certain number of free childcare hours each week.
What Help Can You Get?
Across the UK, there are various schemes in operation to help with childcare costs. In England, you can claim up to fifteen hours of free childcare each week over 38 weeks for a child who is three or four years old. This equates to 570 free childcare hours each year.
If you choose to use your childcare over term time, it will equate to around fifteen hours per week. However, you can spread these hours over fifty weeks, which means your child can have just over eleven hours of free childcare per week. You must be working and earning the equivalent of the minimum or national living wage for sixteen hours per week. In a two-parent family, both parents must meet these criteria.
As well as this, if you are in receipt of certain benefits, you can also get free childcare for your child from the age of two.
Free childcare schemes differ in other parts of the UK. For example, in Scotland the yearly entitlement is 600 hours for children aged three to four. In Wales, free childcare is available to children aged three to four during term time. The number of free hours per week over term time is 10.
In Northern Ireland, three- and four-year olds are entitled to two-and-a-half hours of free childcare each day during term time.
What Other Schemes are Available?
Just because your child is of school age does not mean that he or she does not require childcare. In fact, many parents have to pay large sums of money for their school-aged children to be taken care of while they are at work. The good news is that there are schemes available that will help you to lower your childcare costs.
Childcare vouchers have been popular for a while but not everyone can avail of them because they must be provided through your employer. Furthermore, as previously mentioned, the scheme will no longer accept new applicants after 5th April 2018.
Childcare vouchers allow parents to give up £1,000 of their pre-tax salary in exchange for vouchers to use for childcare costs. The benefit of this is that after tax, that £1,000 would usually be around £700 in your pocket. So, you have an extra £300 to put towards the cost of childcare. The rates are slightly different for those paying higher rates of tax.
It is important to be aware that childcare vouchers are not always going to mean you are better off, particularly if you are claiming working tax credits. If you are entitled to claim the childcare element of working tax credit, you may find that childcare vouchers can reduce the amount of credits that you can claim.
If you are on a low income, you may find that you are better off claiming tax credits than you would be using childcare vouchers. This is because the cost of childcare that is paid for in vouchers is not counted when working out how much you pay in childcare costs for the purposes of tax credits.
What is Tax-Free Childcare?
With the childcare voucher scheme closing to new applicants in April 2018, a new scheme will take its place. Tax-free childcare is available to all parents who work more than sixteen hours per week, earning at least the minimum or national living wage but less than £100,000 per year. The difference with this scheme when compared to childcare vouchers is that it is also open to self-employed parents.
This scheme allows parents to claim twenty per cent of the amount they pay for childcare, up to £10,000 for each child. This means that for every child, you can claim up to £2,000 per year for childcare costs. While this scheme may be better for some people, it is important to check before swapping from the childcare voucher scheme. Be aware that if you leave the childcare voucher scheme, you cannot re-join. You should also be aware that you cannot claim the working element of child tax credits while claiming tax-free childcare; you must choose one or the other.
How to Lower Childcare Costs Outside of Term Time
Lowering childcare costs during school holidays is a big issue for many parents. If you are working in a large company, there may be the option for you to avail of flexible working patterns. Some companies offer term-time to parents, where they only work during term time (38-weeks), but have their salary split over the course of fifty-two weeks.
Holiday camps might be another way to keep your costs down, especially if you can find a funded camp or one that is subsidised by your local council. You may even find that paying for a holiday camp will be less than paying for childcare during the school holidays.
You might also be able to work out a rota with a friend or family member who also struggles with childcare issues during the school holidays. If the summer holidays are the time when you both have a major issue, you could consider taking three weeks off each during this time, obviously not at the same time. Working together to take care of each other’s children could help you save a considerable amount of money on childcare costs.
We hope our short guide has helped a little when it comes to the subject of lowering childcare costs. Feel free to contact us though if you have any questions or you need additional information.