Childcare and nursery costs

The cost of childcare can eat up a large chunk of the family budget. Fortunately, there’s plenty of help available from the government and employers - from tax credits and tax-free childcare vouchers to free childcare.

Check what help you could get with childcare costs

Try the new childcare costs calculator on Gov.uk to estimate how much you could get for approved childcare.

Are you entitled to help with childcare costs?

All three- and four-year-olds in the UK are entitled to some free early education or childcare. How much you can get depends on which country you live in.

England
All three- and four-year-olds are entitled to 570 hours of free early education or childcare every year. Most people take this as 15 hours each week for 38 weeks.

Some two-year-olds are entitled to free early years education and childcare. Your child might be eligible if you claim certain benefits or if they have a disability.

An additional 15 hours of free childcare for three- and four-year-olds is available nationally from September 2017. Check with your provider to see if they are offering the extra hours.

Find out more about free childcare and education in England on Gov.uk.

Wales
Three- and four-year-olds can get 10 hours of free early education a week for 38 weeks a year, in a school or funded nursery.

From September 2017, a new childcare offer is being piloted by the Welsh Government. Under this new offer, three- and four-year-olds with working parents are entitled to 30 hours a week of free education and childcare for 48 weeks of the year.

Find out more about childcare in Wales on the Welsh Government website.

Scotland
All three- and four-year-olds can get 600 hours of free early learning and childcare every year. This works out at around 16 hours every week for 38 weeks.

Some families with two-year-olds might also qualify if they receive certain benefits.

Find out more about free childcare and education in Scotland.

Northern Ireland
Children are entitled to at least 12.5 hours of free preschool education a week for 38 weeks in the year before they start Primary One.

Find out more about free preschool education in Northern Ireland.

Universal Credit

Universal Credit is a new benefit for people in and out of work, which replaces six existing benefits, including Working Tax Credit.

Working families who are eligible for Universal Credit can claim back up to 85% of their monthly childcare costs.

Find out more about Universal Credit on Gov.uk.

POSTED ABROAD?

If you or your partner is posted overseas, you still may be able to claim tax credits just as if you were living in the UK.

Working Tax Credit – the childcare element

Working Tax Credit is one of the benefits that is being gradually replaced by Universal Credit.

You can’t claim Working Tax Credit and Universal Credit at the same time. But you can continue to claim Working Tax Credit, or make a new claim for it, until you are asked to apply for Universal Credit.

When you apply for Working Tax Credit, you’ll be told if you’re also eligible for Child Tax Credit to help with the costs of bringing up a child.

If you’re eligible, it could cover up to 70% of your childcare costs.

Find out more about Child Tax Credit on Gov.uk.

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Tax-free childcare scheme

Tax-free childcare is a new government scheme to help working parents with the cost of childcare.

You can use tax-free childcare at the same time as the 15 hours or 30 hours of free childcare for two- to four-year-olds.

You can’t use tax-free childcare at the same time as:

  • Childcare vouchers
  • Universal Credit
  • Tax credits

If you’re a working parent with children under 12 (or under 17 if they’re disabled) you can open an online account to pay for registered childcare.

You, and your partner if you have one, must both earn at least the equivalent of 16 hours at the National Minimum Wage or National Living Wage and each parent must earn less than £100,000 a year.

For every 80p you contribute to your online childcare account, the government will pay in 20p, up to a maximum of £2,000 per child per year (or £4,000 per disabled child per year).

Find out more on Gov.uk or MoneySavingExpert.

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DID YOU KNOW

You can use the Childcare vouchers calculator to work out your best option for paying for childcare.

Childcare vouchers

The government’s childcare voucher scheme is ending, and will be replaced by the new tax-free childcare scheme mentioned above. After April 2018, the childcare voucher scheme will be closed to new members but if you’re already getting childcare vouchers you can keep getting them as long as your employer continues to offer them.

Childcare vouchers are a tax-free benefit offered by employers to their employees. The vouchers are deducted from your gross salary so you don’t pay tax or National Insurance on them. You can then use the vouchers to pay for any childcare that is Ofsted registered.

Getting childcare vouchers may affect the amount of tax credits you can get. To find out whether you would be better off getting childcare vouchers, use the Gov.uk calculator.

The Armed Forces has its own childcare voucher scheme, which is run by Sodexo – see their website for more information and how to join. The scheme will close to new entrants on 5 October 2018.

If your spouse or partner works outside of the Armed Forces get them to find out whether their employer offers childcare vouchers too. Both of you can take advantage of this scheme so you can make a bigger saving.

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Directly-contracted childcare support

Instead of offering childcare vouchers, some employers choose to make a direct payment to a childcare provider, so that they can provide childcare to you.

This payment is deducted from your pre-tax salary in the same way as a childcare voucher. You get the same tax-free amounts as you would if you were getting childcare vouchers.

After April 2018, when tax-free childcare is fully introduced, you won’t be able to start getting childcare vouchers or directly-contracted childcare.

If you’re already getting this support, you can continue to get it for as long as your current employer continues to offer it.

Find out more about direct contracted childcare on Gov.uk.

Workplace nurseries

Some employers set up their own nursery, either at the place of work or at another location.

Whether it’s free or subsidised, and no matter how much its worth to you, it counts as a tax-free perk of their job.

Family childcare

If you have a grandparent or other relative caring for your children while you’re at work, National Insurance credits are available to help them keep on building up their entitlement to State Pension during this time.
These National Insurance credits are called Specified Adult Childcare credits and you need to apply for them.

Find out more about Specified Adult Childcare credits on Gov.uk

Last reviewed: 25/06/2018

This content has been provided by the Money Advice Service