Childcare benefits explained

Childcare cost benefits are a minefield and, personally, I find it unsurprising that £1000s are being left unclaimed often by the people who need the money most. Tax credits? Childcare vouchers? 15 or 30 hours free? Which way to go and which is best for you? Let’s try and sort it out.

The first thing to realise is that “Childcare” includes all children, including those of school age. Also all childcare provisions for which you can claim any help, must be an Ofsted-registered provider. Registered providers include nannies, childminders, au pairs, nurseries, playgroups, pre-schools, before and after school clubs and summer schools. The provider should be able to tell you if they are registered but, if you would like a list of local registered providers, go to www. calderdale.gov.uk and follow the ‘Education and Learning’ link.

Free Childcare for three and four (and two) year olds.

Starting from the beginning of term after your child’s third birthday, everyone (and this IS everyone) is entitled to 570 hours of free childcare per year. This is usually taken up as 15 hours per week for the 38 weeks of the school year, though you may be able to do less hours per week for more weeks of the year. To access this benefit simply ask your local childcare provider if they have space. Be aware of potential add-on costs though, such as meals or nappies.

Some families are entitled to increase this free childcare to 30 hours per week (or 1,140 hours per year) if they meet certain criteria. If both parents (in a couple) or the main parent (in a single parent family) earns, or is expected to earn, over £1,707.68 in the next 3 months (this odd figure is calculated based on working 16 hours a week for the National Living Wage for over 25s) but less than £100,000 per year, then they can claim. If you are self employed, you can average out your annual income if necessary.

To access this benefit you will need to visit www.gov.uk/apply-30-hours-free-childcare and fill in the form. Once approved you will be given a code to pass on to your childcare provider. Your extra free hours should then begin at the beginning of the next term.

Two year olds from certain low-income families are also entitled to free childcare. Visit www.calderdale.gov.uk to find out more.

If you are still receiving Tax Credits.

Tax credits have been replaced by Universal Credit for a lot of people and, from July ‘19, everyone still on the old scheme will begin to be moved over to the Universal Credit scheme. But for now, those who were claiming the Childcare element of the Working Tax Credit scheme will still receive them. (NB. You may be better off moving to the Universal Credit scheme sooner. There are online calculators available to help you assess whether this will be the case for you).

Childcare costs within Universal Credit.

If you are receiving Universal Credit you can claim back up to 85% if your childcare costs, up to a maximum of £646 a month for one child or £1,108 per month for two or more children. You can only claim the money after you prove you have paid it and you need to apply, each month, through your Universal Credit account. The money will be reimbursed to you through your next month’s UC payment.

Tax-Free Childcare

This is a new scheme to help working parents and will replace the Childcare Voucher scheme. The Voucher scheme is now closed to new applicants but, if you are already in the scheme, you received your first vouchers before 4th October ‘18 and your employer continues to offer the scheme, you are not forced to change. However it may be in your interests to do so. Again, look online for a comparison calculator.

So, this new Government-backed scheme gives eligible families an extra 20% towards childcare costs. For every 80p you put in, the government will add 20p, effectively giving you your basic-rate tax back, hence the name.

In total you can claim up to £2,000 per child (more if your child is disabled) each year, meaning £10,000 of childcare will cost you only £8,000.

To qualify both parents (in a couple) or the main parent (in a single parent family) must earn, or be expected to earn, over £1,707.68 in the next 3 months but less than £100,000 per year; this includes self-employed parents, where a 3-monthly average income is used. Your child must be 11 or under (16 for children with disabilities).

To access this money, you need to set up an online childcare account via www.gov.uk/ apply-for-tax-free-childcare. Only one parent can open the account (of course both can access it), so decide whose name it should be under. If you are separated and can’t decide, both parents can apply for an account and HMRC will decide who gets it.

You can pay money in via a standing order, with a debit card or directly from a bank account and the government will top the money up by 20% the same day. So, pay £80 in at lunch time and, by the evening, that should be boosted to £100. The childcare providers can then be paid directly from this account.

You can vary the amount you pay in to the account each month but, bear in mind, the maximum government top-up (£2,000 per year) is actually £500 every three months, so try to even out your input in order to get maximum benefit. Of course, if your childcare costs are higher than £10,000 per year, you can put more money into the account to pay your provider, but you won’t get more than £500 total top-up every three months.

Every three months you will also be required to ‘reconfirm’ your eligibility but this is simply to tick a box stating your circumstances haven’t changed.

NB. You cannot get this new Tax-Free Childcare at the same time as claiming Working Tax Credit, Child Tax Credit, Universal Credit or childcare vouchers. Your Working Tax Credit or Child Tax Credit will stop straight away if you successfully apply for Tax-Free Childcare. However, wait until you get a decision on your Tax-Free Childcare application before cancelling a Universal Credit claim. You can join this scheme and still get the 30 hours free childcare, but both claims must be made in the same name.

Paying for Summer Childcare

When we say Summer childcare, we mean childminders, nurseries, etc AND Children’s Summer Activities - Football weeks, camps, etc. If you need to pay for them and they are Ofsted-registered, then you can claim/pay as you would using Childcare tax-credits, UC claim-back, vouchers or your tax-free childcare account.