What Help Can Parents Receive with Childcare Costs in the UK?

It has been calculated that childcare costs in the UK have risen four times faster than real wages since 2008.  The average cost of a day nursery for a 2-year-old in the UK is now over £200 a week although there are regional variations. 

Without affordable childcare, many parents find themselves unable to return to work, improve their finances and provide for their family.  Although it is possible for them to take out personal loans with credit on demand, this solution is only feasible when there’s an urgent need of cash but doesn’t solve the underlying problem.  It is, therefore, welcome news to learn that the UK government has invested £6 billion up to 2020 in providing financial support for working families with children. 

Help has always been available, but the system has recently been overhauled.  Since 1989, some parents have been eligible for childcare vouchers (as part of a salary sacrifice scheme).  Later, this scheme was partially replaced by the tax credits scheme which allowed parents to reclaim up to 70% of their costs (up to a cap).  Both of these schemes are gradually being phased out and replaced by alternatives, so they are now closed to new applicants. 

Recipients of the new state benefit, Universal Credit, can now apply for up to 85% of their childcare costs to be paid for any child up to the age of 16 (subject to a cap on the maximum amount).

Apart from this support, there are many other childcare choices in the UK.  However, all financial aid is only possible for registered child carers, nurseries or agencies. 

The main provision is a tax-free state contribution to childcare costs for any child up to the age of 12 (or 16 for a disabled child).  For every £8 that parents pay for their children to be cared for, the government makes a contributory top-up of £2 (up to a maximum of £2,000).  To be eligible, at least one parent must be working at least 16 hours a week and earning the equivalent of the National Minimum/Living Wage (the equivalent of £125 per week).  Universal Credit recipients and high earners (one parent earning over £100,000 a year) are excluded from this scheme. 

Parents of children who are 3 or 4 years old are also entitled to 15 or 30 hours of free childcare depending on the provision in their local authority in England.  (Schemes in other parts of the UK may vary slightly.)  This is usually available for a period of 38 weeks, but in certain circumstances, the weekly hours can be reduced to ‘stretch’ the provision over the whole year. 

Recipients of state benefits might also be entitled to free childcare for 15 hours a week for a 38-week period for a child aged 2.  Again, this scheme is flexible enough to be stretched, or can be used for different providers.  The child is eligible for the scheme on 1stJanuary/April/September following their second birthday.