Budgeting for childcare: Costs and financial support

Childcare can be very expensive and as the UK feels the pinch of the cost-of-living crisis, this may be weighing heavier on your mind.

Which type and frequency of childcare suits you and your family’s budget is highly individual.

While there isn’t an easy solution, here are some tips on managing the cost of your childcare.

Start your childcare search early

Finding the right childcare for your family and budget can take time and leaving it to the last minute can limit your options.

It’s a good idea to start your childcare search early, especially if you live in a high-demand or expensive area.

Things can go wrong, such as your budget changing, fees changing, the nursery you were expecting to send your child to being full or even closing down.

Tips

• Make enquiries and visit childcare providers long before your child is due to start.
• Get quotes – some providers may be happy to offer a sibling or Emergency Service Staff discount.
• Get on waiting lists for any providers that fit your criteria and reserve a place at your favourite.
• Have backups (including cheaper options) in case anything goes wrong.

Find out how many free childcare hours you are eligible for

Each country in the UK offers free childcare hours. You can apply for the hours on the Government website; if you are eligible they will give you a code to give to your childcare provider.

Even if your child is not old enough to qualify for free hours yet, it’s worth factoring them into your future childcare budget. The scheme is available for children from the age of nine months.

England

15 hours per week

• For all 3 and 4 year olds
• As of April 2024, for 2 year olds with working parents
• As of September 2024, for children aged 9 months+ with working parents (the application opening date for this is 12 May 2024)

30 hours per week

• For 3 and 4 year olds with working parents
• From September 2025, for children aged 9 months+ with working parents

Scotland

• 1140 hours per year of free childcare for all three and four-year olds (some areas may still offer only 600). Check with your local council when you can apply as this varies between regions.

Wales

• Up to 30 hours per week of free childcare for all three and four-year-olds. Check when you can apply for these with your local Family Information Service.

Northern Ireland

• 12.5 hours per week of free pre-school education for all three and four-year-olds

Sure Start programme for disadvantaged families

Sure Start (called Flying Start in Wales) is a UK-wide scheme that aims to support disadvantaged families. This support includes some free childcare hours at Sure Start Children’s Centres.

To find out more, see our full article: What is a Sure Start Children’s Centre?

Tax-free childcare

Tax-free childcare is a scheme by which for every £8 you pay towards childcare, the Government will pay an additional £2.

You may be eligible if:

• You (and your partner if you have one) work for at least 16 hours a week and make less than £100,000 a year.
• You are unemployed but your partner works, and you receive certain benefits:
  • Severe Disablement Allowance
  • Incapacity Benefit
  • Carer’s Allowance
  • Contribution-based ESA

Find out more about tax-free childcare.

Tips

• Find out how many free childcare hours you are eligible for according to your country and circumstances.
• Factor these into your budget, and make sure the childcare providers you are interested in accept them.
• Apply for them as early as possible.

Check if you qualify for financial help/discounts

If you are on certain benefits, a low income, or your child is disabled, you may be entitled to extra financial support to help with childcare costs.

Remember that everybody responsible for a child is eligible for Child Benefit.

15 hours’ free childcare for two-year-olds

In some cases, you can qualify for 15 hours’ a week of free childcare if your child is two years old.

These circumstances are:

• You receive certain benefits
• Your child receives Disability Living Allowance
• Your child has Special Educational Needs or Disabilities (SEND)
• Your child is looked after by the local authority, or is under a kinship or guardianship order.

Child Tax Credit replaced by Universal Credit

Child Tax Credit has been replaced by Universal Credit.

There are three elements to the Universal Credit you could claim, including the child element, disabled child addition and childcare cost element.

The childcare cost element allows you to claim back up to 85% of your childcare costs per month, though there are upper limits. To claim it, you must be in paid work or be due to start a job you have been offered.

Further information on Child Tax Credit and Universal Credit.

Childcare Grant for students with children

In England, students in full-time higher education who have children can be eligible for the Childcare Grant.

This either pays for 85% of your childcare costs or gives you a fixed weekly amount of money to help with them, which ever is less.

Find out more about the Childcare Grant.

Weigh up your childcare options

Once you have an idea of what free hours/support you could be eligible for, have a think about what types of childcare you’d like for your child.

Please be aware that the hours above only apply if you’re using a registered childcare provider, i.e. not friends or family looking after your child or any provider who is not registered with their relevant regulatory body.

Childcare options you could look into include:

• Day nurseries and pre-schools – these offer many benefits to your child’s early years education and development. There are also different teaching methods to explore within these, such as Montessori, Forest Schools and Reggio Emilia. Find out more about early years teaching methods.
• Nannies – these can be expensive but it is possible to share a nanny with friends if they have a child of nursery age too, in order to cut costs.
• Childminders
• Au pairs
• Play schemes and play groups

Here is a guide to average childcare prices and the benefits of each type.

Work out what’s cheaper for you

Once you have an idea of what you’re eligible for and which childcare providers you’re interested in, it’s a good idea to do some calculations to see which options best fit your budget and circumstances.

Things to consider could include:

• Whether family or friends are willing to help with childcare on a regular basis.
• If it works out financially to continue working your current hours, or if the additional hours’ childcare you’d need to pay for would make you better off going part-time.
• Speak to your employer about whether they are willing to be flexible on your hours or working from home.