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One of the most substantial costs for working parents is childcare. So how much does it cost and what help can you get?
Cost of childcare
The cost of childcare can vary depending on the type of childcare you use and where you live in the UK. In 2023 the average cost of sending a child under two for 50 hours’ childcare a week was £300 per week and for 25 hours £148.63 per week. For the same hours, the average cost of a registered childminder would be £247.19 and £125.91 per week. However, you might pay a lot more in London and less in other parts of the UK. There are other childcare options available such as a nanny, au pair, after school clubs or a mixture of different forms of childcare.
Available help for childcare costs
There’s Government help available in the form of free childcare hours and tax-free childcare. To find out what you are entitled to there’s a childcare calculator on the gov.uk website. You’ll need to input you, and your partner’s , if you have one, working hours and income as well as the dates of birth of your children and the cost of childcare. Free childcare hours vary depending on where you live in the UK, but the calculator takes this into account and asks which part of the UK you live in.
Tax-free childcare
Tax-free childcare offers a 20% top up, to a maximum of £2,000 per child, for parents who meet the criteria. If you have a child with a disability then this maximum increases to £4,000. You register for an online childcare account and for every £8 you pay in, the government pays in £2. You can use this account to pay for nurseries, childminders, after school clubs or play schemes as long as your childcare provider is registered.
Tax-free childcare isn’t available if you or your partner have taxable income of over £100,000.
You can find more information and how to register on the Gov.uk website.
Free childcare hours
Free childcare hours mean that the local authority provides funding for a certain amount of hours. However, private nurseries often require a contribution because the amount they receive from the local authority doesn’t cover all the cost.
You can use tax-free childcare and free childcare hours at the same time.
Universal Credit for childcare
If you are working or about to start work and on a low income, there is a childcare element to Universal Credit that you can claim. You’ll only receive this for a maximum of two children if they were born after 6 April 2017. You can check whether you are entitled to claim on the Gov.uk website.
Child Benefit
Child benefit is a payment that every child is entitled to, no matter how many children you have. However, higher earning parents may choose not to receive the child benefit payment due to a tax charge that applies. More information on child benefit and the tax charge is available in our guide.
How to reduce the cost of childcare
There are several ways that you can reduce the cost of childcare. Here are some suggestions.
- Ask family for help. This is by far the biggest money saver – the only catch is having a relative willing to help out not just for a few hours, but on the basis of your working hours. This can be a big ask for grandparents, but if you are lucky enough to have this willing support, it will save you thousands of pounds.
You can also transfer your National Insurance credits to grandparents or other relatives who are no longer employed but looking after your children so you can go to work. These credits are called Specified Adult Childcare Credits. This could mean that the grandparents will have more State Pension in retirement. Find out more about this scheme on the Gov.uk website and in this article. - Think about a childminder. Childminders can be cheaper than nurseries and will often drop off and pick up at nursery if you need childcare before or after nursery hours. They’ll also collect from school so if you have more than one child this can be really useful and cost effective.
- Do your research into local childcare. Research and compare the costs of different childcare providers locally. It’s also a good idea to get your son or daughter on the waiting list for the one you want as early as possible, so you are not forced to accept a place that’s more expensive than you can afford.
- Nanny sharing. Consider a nanny or nanny share if you are on a higher income and you have two or more children. Two children in day nursery is twice the cost of one. It can work out cheaper to hire a nanny or better still, to share a nanny with another family, than it is to pay for two day nursery places. However, hiring a nanny involves paying their tax and National Insurance, as well as holiday, pensions and sick pay, as they are an employee
- Consider an au pair. If you can accommodate an extra person easily (a decent size spare room and a separate bathroom to the one you use is usually expected) then hiring an au pair to help can be a good idea. They can do the school run for you and prepare children’s meals.
- Working from home. This can reduce childcare costs as childcare will normally be closer to home and not having a commute could mean less costs. Working full time over four days or doing four days’ work over three days, for example. can mean less time in childcare for children.
