Deciding to return to work following maternity leave or a career break to raise the munchkins? Looking at going into further education to progress a career choice? Thinking about the financial implications of finding childcare and confused as to which way to go? Below I will try to summarise childcare options available to parents based on circumstances and income:
A lot of employers offer a scheme called ‘Childcare Vouchers’ where you sacrifice part of your salary each month to go towards the cost of childcare thus saving up to £933 a year in tax and National Insurance for children under 16 years old, 17 if disabled. Childcare Vouchers are now to remain open to new applicants until October 2018 and parents already using the scheme through their employer can continue to use them past this date if applicable. Childcare Vouchers may also affect the amount if you are in receipt of Tax Credits.
I personally use the Childcare Voucher scheme offered through my work and am stopped the maximum amount of £200 before tax, my childcare account makes £243 each month reflecting the amount I have saved in tax and NI. The childcare provider you use must be approved and with the scheme in order to be payable through the scheme, I then bank transfer the remaining balance to the nursery.
Unfortunately you cannot use Childcare Vouchers as well as Tax-Free Childcare, there are calculators online to show you which scheme you are better off enrolling in but the general opinion is that if you are already in the Childcare Vouchers scheme to continue to do so.
If after considering your options you are better off applying for Tax-Free Childcare remember to tell your employer within 90 days so they can cancel your Childcare Vouchers and bear in mind once you have withdrawn you cannot add back into the scheme. You can use Childcare Vouchers alongside the 30 free hours for 3 and 4 year olds.
If you are a working family with children under 12, 17 if disabled, you can apply for a new Government Scheme ‘Tax-Free Childcare’, for every £8 you pay in the Government will add an extra £2 which works out up to £2,000 per child and up to £4,000 for a disabled child. You cannot apply for Tax-Free Childcare if you are not working unless your partner is working or claiming Incapacity Benefit, Severe Disablement Allowance, Carer’s Allowance or Employment and Support Allowance.
You must earn at least £125 per week (equal to 16 hours at the National Minimum Wage) and cannot expect to exceed earnings or £100,000 or more. You cannot use Childcare Vouchers, Universal Credit or Tax Credits when applying for Tax-Free Childcare but you can use Tax-Free Childcare alongside the 15 and 30 hours for 2 and 3-4 year olds.
Childcare Vouchers or Tax-Free Childcare?
I personally have taken my employer’s advice and stayed in the Childcare Vouchers scheme, I work 24 hours per week and my other half is self employed in excess of 40 hours per week and we do not qualify for the 2 year old 15 hours funding. After reading the below link scenarios, which gravitate that once the 30 hours kicks in for 3 & 4 year olds, applying to our son a term after his 3rd birthday (January) we will be better off financially staying with Childcare Vouchers.
Below are some links to help you decide based on your own situation, personal income and research:
Tax Credits for Childcare
If you are entitled to Working Tax Credit, make sure you declare your childcare costs when carrying out your application or renewal to ensure you receive what you are entitled to. If you and your partner work at least 16 hours a week you can claim back up to 70% of your registered eligible childcare costs for children under 16, 17 if disabled, if not already claiming another form of Childcare Help.
You cannot claim Childcare Vouchers, Universal Credit, Tax Credits and Tax-Free Childcare at the same time. In time Universal Credit will be phased in and existing benefits including tax credits will be replaced – you do not need to do anything until prompted to by HMRC.
15 Hours Free Childcare – 2 Year Olds
You are eligible to claim 570 flexible hours of free childcare a year if you have an annual income of less than £16,190 before tax or claiming Income Support or JSA. You are also eligible if your child gets Disability Living Allowance, looked after by a local council, they’ve left care under child arrangements order or adoption order, has a current statement of special education needs (SEN) or an education, health and care plan (EHC).
If your child is entitled to 15 hours free childcare you can start to receive this from 1 January, 1 April or 1 September following your child’s 2nd birthday at participating nurseries, playgroups or childminders.
15-30 Hours Free Childcare for 3 & 4 Year Olds
You are eligible for up to 30 hours of free childcare the term after your child’s 3rd birthday if you or your partner are working at least 16 hours per week at the National Minimum Wage and earn no more than £100,000 no more.
You can use a total of 1,140 hours per year available for 38 weeks of the year (term time). Some approved providers allow you to stretch the 30 hours allowed over the 52 week year and apportion the extra amount payable monthly. This option is at the childcare provider’s discretion and you are advised to apply well in advance
If your child is entitled to up to 30 hours free childcare you can start to receive this from 1 January, 1 April or 1 September following your child’s 3rd birthday at participating nurseries, schools, childminders, playgroups and after school clubs. The free hours are not intended to cover consumables, trips, additional activities or meals.
Childcare help whilst learning
If you are thinking of going into further education e.g. NVQ, BTEC or A Levels or you are currently in full or part time education then you could be entitled for weekly payment help from the below providers:
Care to Learn
If you are under 20 and starting a publicly-funded course in a school, sixth form or college then you may be eligible for up to £160 per child per week (outside of London) and up to £175 per child per week (inside London). Payment goes directly to the approved childcare provider and the payments will stop when you reach the end of your course or if your child stops attending childcare. You cannot apply if you are receiving a salary on an apprenticeship or doing a higher education course at University.
Discretionary Learner Support
If you are 20 or over, on a further education course and facing financial difficulty you could be entitled to help paying for childcare directly through your learning provider. You cannot apply if you are getting student finance for higher education or on a Community Learning course.
If you are a full-time higher education student and have children under 15, 17 with special educational needs you may be eligible for help with up to 85% of your childcare costs depending on your household income and number of dependents. You could be entitled to a maximum of £164.70 a week for one child. The money if paid on top of your student finance and you do not have to pay it back You must be eligible for student finance to apply. You cannot apply if you and your partner are claiming Working Tax Credits or to cover 3 and 4 year olds free childcare.
Nanny and Grandad
If you have family around you willing to help with childcare whilst you go back to work or education get them on board, it’s a great way for them to bond with munchkin whilst your not there and they’ll love having them!
I count myself lucky that I have a lot of family that love to have my little boy, my Mum has Frankie all day on a Monday and collects him from nursery on a Tuesday afternoon and my Mother in Law picks him on from nursery on a Wednesday – which helps with the costs of paying for a full days care and they absolutely dote on him so everyone’s a winner!
Grandparents aren’t usually eligible for any financial payment from the Government (excluding personal arrangements you have with your parents), but in some cases retired grandparents can benefit from a National Insurance credit when providing childcare that doesn’t affect their state pension, for more information see link below on the Government website.
by Rebecca Allerton