If you pay for nursery or a childminder it's likely the cost of childcare takes up a large proportion of your income. We explain how you can get help with the cost of childcare so there's more money in your wallet at the end of each month.
It’s fair to say that the cost of child care for many people is much greater than they bargained for.
In fact, child care now takes up on average 28% off a UK family’s income, a sizeable chunk of money which you could put to good use elsewhere.
But is a paying expensive child care prices unavoidable or are there ways to make it more affordable?
What are your options?
If you need to reduce your child care costs without giving up your day job then you have a number of options:
Child tax credits
If you and your partner are working at least 16 hours a week and your total household income is below £42,000 then it’s likely that you’ll qualify for child tax credits.
Essentially this is cash from the government paid specifically to help cover the cost of childcare.
Even if you’re not working then you may still qualify, especially if you are on maternity or paternity leave or have been signed off sick from work.
Equally even if your household income exceeds £42,000 you could still qualify for child tax credits, especially if you have more than one child or care for a disabled child.
Depending on your circumstances you could receive anything up to £13,345 a year in child tax credits, more if you have two or more children.
Child tax credits are paid directly into your bank account so you can use the money to cover some of the cost of childcare.
Visit the HMRC website for more information and to find out if you qualify for child tax credits.
Childcare vouchers
One of the most widespread and popular ways to cut childcare costs is to use childcare vouchers, bought through your employer and paid for directly out of your salary.
You can use childcare vouchers to pay for childcare with a registered childcare provider (such as a nursery, playschool, childminder or after school club).
There are a number of tax breaks that you'll be able to take advantage of by paying for childcare with childcare vouchers, together they could see you save anything up to £55 a week; that's potentially over £1,000 a year. You'll be able to double this if both you and your partner take advantage of the scheme.
The main benefit of using child care vouchers is that they can be purchased directly from your net salary, before tax and national insurance are deducted from your pay. This means you get more childcare for less money so it's well worth investigating.
For most people using childcare vouchers can help to cut the cost of childcare, however if you already receive child tax credits then this may not be the case.
This is because the amount you receive in child tax credits is partially determined by how much you pay for your childcare. As any childcare you pay for using childcare vouchers will be excluded from your child tax credit assessment so you may qualify for a lesser amount of child tax credits, even though you’ve still paid for childcare vouchers.
Child tax credits or childcare vouchers?
As using child tax credits and childcare vouchers in combination isn't likely to be beneficial you need to work out which option will help you to save the most money before you apply for either scheme.
You can use the calculator on the HMRC website.
Employee crèche
If you have the option available to you, using an employee crèche could be a good way to cut your child care costs.
If your employer partially subsidises the cost it may well be a cheaper option than independent child care. Of course, it is also likely to be in a convenient location in relation to your place of work so you cut down on travel time and costs too.
However, even if you have an employee crèche available it still makes sense to compare the costs with other local nurseries and crèches in your local area to ensure you’re getting the best price.
Flexible work
Under current UK legislation an employer must seriously consider any suggestion or request for flexible working hours.
While this doesn’t mean they have to accept your request to work outside the standard 9-5, they cannot simply dismiss it out of hand.
As such it's worth looking at whether you can reduce the amount of childcare you need to pay for simply by changing the times you and your partner work.
For instance can you start later or finish earlier, or even take a day or afternoon off (and make up the time on the other days you work) each week so you need fewer hours of childcare.
Use relatives
Taking advantage of the enthusiasm of grandparents and other relatives can not only strengthen your child’s relationship with their extended family but can also save you money on child care.
Although you may feel guilty about asking family members to look after your children while you’re at work you may be pleasantly surprised how enthusiastic they are to be involved.
Speak to family or friends that you feel might be willing to look after your children, and see if they'd be able to help out on a full time or part time basis.
You can also suggest payment or other ways you can re-pay them indirectly (although you will only be able to claim financial help with the cost of this childcare if they register as an official childcare provider).
Even if you decide to pay a friend or family member they are likely to be significantly cheaper than a qualified nursery.
Does work pay?
When it comes to cutting the cost of childcare, it is worth looking at whether you would be better off if you or your partner reduced the number of hours you work, or even stop working completely.
Remember to factor in the cost of commuting and other costs into your calculations.
If working is actually costing you, you should weigh the real value of continuing to work and seriously consider whether you would be better off financially if you gave up work to look after your children.
This decision isn't going to be clear cut as you'll need to think about how giving up work will affect other factors, such as your position within your company, career aspirations and the appeal of spending more time with your children.
That given, you need to weigh up all these different factors rather than just working out the hard maths to find the cheapest option.
For more help reducing the cost of child care, try following our step by step Action Plan: How to cut your childcare costs.
