The law in the UK makes it very clear that it’s not acceptable to leave a child on their own if it puts them at risk (it’s also a criminal offence). As a result, childcare is a requirement for many families, whether single or dual parented. According to the Department for Education, in 2016 there were roughly 3,092,100 childcare places available, split across nursery, childminders and group and school providers. However, finding the right provider, securing a place for your child and getting help with the costs can be a complex and frustrating experience.
What help is available?
Childcare costs make up a part of the Working Tax Credit and, if you’re eligible, you could get help with up to 70% of the cost of childcare (working families on Universal Credit could claim up to 85% of monthly childcare cost). To be eligible, parents need to be working at least 16 hours a week and earning below a certain level. There are also restrictions on the childcare provider you can use – the government’s childcare costs calculator is a simple way to work out what your situation entitles you to.
If you are eligible for help with childcare costs then the 2016/2017 rates are:
1 child, if you pay up to £175 per week for the childcare you could get support up to £122.50 per week.
2 children, if you pay up to £300 a week for the childcare you could get support up to £210 per week.
In addition to Working Tax Credit support, all three and four year olds in the UK are entitled to 570 hours of free childcare per year. This varies depending on where in the UK you live. Most people take this support as 15 hours a week for 38 weeks. The free hours can be used with any Ofsted registered childcare providers, including nurseries and nursery classes, playgroups and pre-schools, registered childminders or Sure Start children’s centres.
Employer supported childcare
A government scheme allows your employer to make direct payments towards your childcare. There is no obligation on employers to do this and it’s very much an individual business decision. The contributions that the employer makes won’t attract tax or national insurance as long as they fall below the following thresholds:
£243 a month if you’re a basic rate taxpayer (20%)
£124 a month if you’re a higher rate taxpayer (40%)
£110 a month if you’re an additional rate taxpayer (45%)
If contributions are more than the above then anyone earning £8,500+ a year will be required to pay tax on the payments made.
Employers can also provide their workforce with childcare vouchers, either as a benefit on top of an existing salary or as part of the salary sacrifice scheme. Salary sacrifice means that you permanently sacrifice a portion of pay in exchange for a benefit such as childcare vouchers. These vouchers are for children under 15 and non-refundable – they can be ‘spent’ with any Ofsted registered childcare provider. The same tax and national insurance rules apply as above.
Employers may also set up their own workplace nurseries. These may be free or subsidised and are counted as a tax perk of the job.
Tax-Free Childcare Scheme
As of April this year, a new scheme means that parents of children aged under 12 can get 20% of the costs of childcare paid for by the government. This is a particularly positive development for self-employed people who are not eligible for childcare vouchers. The scheme works via an online account that parents pay into, which is then topped up by the government. There are caps on government contributions of £2,000 per year.
Choosing the right provider
For most people, the first step is an Ofsted regulated provider. Beyond that it will be down to your individual discretion and instinct.
How do the staff interact with the children? Are they warm and responsive or cold and detached?
Will they commit to looking after your child for a minimum period of time? Children need stability so a constant childcare provider is key.
What are their policies? For example, how do they deal with bullying, what is the key focus when it comes to discipline?
Ask lots of questions – even questions that might seem silly at the time can be useful in creating a mental image of whether this childcare provider is a good bet.
Drop by unannounced – you’ll get a better idea of how the provider operates and you’ll know how they deal with people who just show up close to the children.
Trust your gut – what is your instinct telling you about this person or organisation?
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read more about Alex Hartley