Can I get help with the cost of childcare?

Many working parents struggle with the burden of childcare costs. For some, it doesn’t even make financial sense for them to go back to work until their children start school.

A woman sits at a table with three children, a colourful toy in the foreground.

As our Childcare Costs Calculator demonstrates, the costs of sending a young child to nursery can be significant. But childcare costs don’t stop when they leave nursery. You may also need support in the school holidays and at other times into your child’s teenage years.

Here is an outline of some of the options available for help with the cost of childcare. Please remember, this brief guide should not be taken as advice. To find the best option for your circumstances, we recommend you seek an independent financial adviser.

What is the Tax-Free Childcare Scheme?

The Tax-Free Childcare Scheme is designed to help parents pay for childcare so they can work. It gives working families a 20% bonus on top of whatever they pay into a dedicated childcare account to be used for qualifying childcare for children under 12.

What this means is that for every £8 you pay in to a Childcare account, the government will pay in £2, up to a maximum of £2,000 each year for each child.

tax-free childcare scheme

Other people such as family members can pay into the account as well, which operates as part of National Savings & Investment (NS&I). You can withdraw the money you have put in whenever you like without penalties, but you will lose your government bonus. You can also build up credit, so it is ready for you to use at times when you need it most, like during school holidays.

The scheme replaces the childcare vouchers scheme and directly contracted childcare provided by employers in the Employer Supported Childcare scheme. You can apply for Tax Free Childcare through the government’s Childcare Choices website.

What are Childcare Vouchers and how do they work?

The childcare voucher scheme worked through employers, allowing parents to pay their registered childcare providers from their gross (pre-tax) salary.

The Tax Free Childcare Scheme replaces the childcare vouchers scheme, which is now closed.

How could Universal Credit help?

This scheme is being phased in to replace some existing benefits including tax credits. Universal Credit for childcare applies to low income families with children under 16. The scheme can cover 85% of eligible childcare costs, up to £646 for one child or £1,108 for two or more.

What is the childcare element of Working Tax Credit?

Families with partners who are working at least 16 hours each a week, with children under 16, or under 17 if disabled, can claim back up to 70% of eligible childcare costs. Depending on how much you earn, you could get up to £122.50 per week for one child or £210 for two or more.

You cannot claim Universal Credit, tax credits, or Tax-Free Childcare at the same time.

Am I eligible for any free childcare?

Families with two-year old children who are receiving some types of benefit are entitled to 15 hours of free childcare or early education a week.

All families in England with three and four year olds are entitled to 15 hours of free early education or childcare a week. Some working families will be entitled to even more.

Parents need to be working at least 16 hours a week at the national minimum or living wage, and not earning more than £100,000 a year.

Find out more about early years education funding..

How are working parents using these various schemes in practice, and how much does it really cost?

Knowing and understanding more about what you are entitled to is always helpful when budgeting for childcare, but how do real, working parents deal with paying for childcare?

Affording childcare with the help of childcare support

Gina lives in Wiltshire and is mum to a five-year old and a two-year old. She says in term time she spends about £600 a month on childcare, sometimes as much as £700.

“I used to get childcare vouchers, now I’m on the Tax Free Childcare Scheme. I do factor in breakfast club and other activities where needed which is why the cost varies. Bring on April when I get 30 hours funded. The cost of childcare is definitely the reason why we spaced out our family – having two children in nursery just wouldn’t have been affordable.”

Coping with childcare without government support

Yorkshire mother Rachel has two four-year old twins and pays nearly £2,000 in childcare every month. She does not get any government support:

“We weren’t eligible for government help apart from the free hours that everyone gets anyway,”

she explained.

Instead she uses Busy Bee Vouchers, a scheme which takes childcare vouchers out of her gross salary. She says she found the whole system quite confusing.

“After filling in the forms, we found out from a friend who got rejected for assistance that it is means tested, so we didn’t even send the forms in. The free hours are only available in term time, which we weren’t aware of until our nursery bill went sky high again.”

Thinking about saving for your child’s care?

If you’re thinking ahead about paying for childcare in the future, it’s a good idea to think about the costs so you can budget effectively. Crunch the numbers for yourself with the OneFamily cost of childcare calculator.

Note: We take care to ensure Talking Finance content is accurate at the time of publication. Individual circumstances can differ so please don’t rely on it when making financial decisions.