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Cost of living crisis: How to cut the costs of childcare

·Finance Reporter, Yahoo Finance UK
·5-min read
Cost of living crisis File photo dated 08/02/12 of a child playing. The Labour Party has said it will fund the equivalent of 400,000 weeks of full-time childcare. Issue date: Tuesday April 12, 2022.
Cost of living crisis: The average cost for a part-time nursery place is £7,000. Photo: PA

As the impact of the cost of living crisis hits home for millions of people, parents across the UK are paying eye-watering sums of money every month in childcare fees.

A survey found that two-thirds of respondents said they are paying as much or more for childcare than for rent or mortgage payments, and one in four parents are claiming to have had to cut down on necessary expenses such as food, heating or clothing to afford childcare.

The average cost for a part-time nursery place is £7,000 — often one of the biggest fixed costs for families.

The best options will depend on personal circumstances, but here are some top tips from consumer group Which? to save money on childcare.

Working parents can claim tax-free childcare

Tax-free childcare is a government scheme that pays working parents a top-up based on their childcare costs.

Parents can claim up to £500 every three months for each child looked after by an approved childcare provider, sent via an online account. Parents that meet the eligibility criteria can apply through HMRC.

Check if you’re eligible for tax credits or universal credit

Both working tax credit and universal credit offer extra support for families where the government gives the recipient extra money towards paying for childcare.

To qualify for working tax credit, the person claiming, and their partner, must both work at least 16 hours a week. One person can be out of work if they are entitled to carer’s allowance, in prison, in hospital, or incapacitated.

Read more: Cost of living squeeze hits 900,000 more households

It is possible to save up to 70% of childcare costs, up to a maximum of £175 per week for one child, or £300 for two or more children.

Similarly, people claiming universal credit can get 85% of their childcare costs covered, to a maximum of £646 a month for one child, or £1,108 for two or more children.

Take advantage of free childcare hours

In England, there are schemes available for parents with very young children. The "free childcare for two-year-olds" scheme is for those who receive certain benefits.

In addition, everyone is eligible for 15 hours of free childcare per week for children aged three or four. This is for 38 weeks a year, but parents can opt to take fewer hours to spread this over more weeks. Parents on lower incomes might be able to claim 30 hours of free childcare a week, as long as they and their partner are earning at least the national minimum wage or living wage.

In Scotland, all three- and four-year-olds are entitled to around 30 hours of free childcare a year. There is also a scheme for two-year-olds for those on certain benefits and low incomes.

Read more: Rising food and fuel costs sting low-income households

In Wales, all three- and four-year-olds can get 30 hours of free childcare a week. The 30 hours is made up of a minimum of 10 hours of early education a week and a maximum of 20 hours a week of childcare.

In Northern Ireland, three- and four-year-olds get 12 and a half hours of free childcare per week during term time through a funded preschool place.

Don’t forget about child benefit

While not childcare specific, child benefit payments from the government can help ease the cost of childcare.

For the 2022-23 tax year, parents can claim £21.80 for their first child and an extra £14.45 a week for any additional children. Parents will be paid child benefit until their child turns 16 — or until they turn 21 if they’re in an approved form of education or training.

It is worth noting that child benefit is not means-tested. However, if one parent earns more than £50,000 a year, they will incur a tax charge on the money received. If they earn more than £60,000 a year, they will have to pay back all of the benefits received.

Read more: UK average rent surges past £1,000

Even so, Which? suggests it is worth registering and just opting out of the payments, as parents will receive national insurance credits while they are off work.

Try ‘parent sharing’ with a friend

For parents with friends who have similar schedules and childcare needs, a cheaper or free childcare option is to consider looking after each other’s children. While this erases the advantage of professional childcare, it allows children to socialise.

Get grandparents involved

Grandparents are often the first port of call to help with childcare, although many are unaware that they might qualify for benefits as a result. Grandparents who are not already retired and looking after a child under the age of 12, may qualify for national insurance credits, and time spent caring counts towards their state pension eligibility.

Find cheap and free holiday activities

Which? found a number of cheap and free activities to keep children entertained during school holidays.

The Family and Childcare Trust lists organisations in local areas and provides information about childcare and family services. There are often youth groups and community centres which offer some form of help during the holidays.

Read more: Petrol and diesel prices: How much is it costing to fill your tank?

Many local councils offer free events and activities during school holidays, so it is worth checking their websites.

Check out local charities

Organisations such as the YMCA, local church groups or local authority play schemes could be good places to look for free after-school clubs and classes.

These are intended for parents who are unable to pick their children up after school, which can save a lot of money compared to a nanny or childminder. However, services can be limited to only serving certain schools in the local area.

Watch: How to save money on a low income

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