Where To Make Real Savings On Childcare – 22 Oct 2015

childcare costsI was recently showing some parents around one of our nurseries in Farnborough, when the subject of childcare costs came up. This is always a big concern for parents, especially when returning to work. So here I share some tips for saving on your childcare costs, for the benefit of our parents in Farnborough and you.

3 Ways To Save On Childcare Costs

For many parents the end of maternity leave (or shared parental leave) is a time to make some major decisions. Not least about finances and the question of whether or not both parents should return to fulltime or part time jobs.

For many people on average salaries, the cost of childcare can be the tipping point between staying at home or returning to work; weighing up whether it’s financial viable, or if managing on a reduced income in the preschool years will pay off long term from a career point of view.

Of course for others there’s no question about returning to work or not, but the cost of childcare is still a significant factor and I’m sure all parents would like to make savings somewhere.

Here are my top 3 ways to save…

1. Childcare Vouchers

This autumn the Government had planned to change the Childcare Voucher scheme and replace it with a new scheme called Tax-Free Childcare. This is currently on hold until 2017 as a legal challenge set back its implementation this year. This means that you can still take advantage of the existing Childcare vouchers scheme, which for some may save you more than the new incentive.

You can read about Tax-Free Childcare in this post, for future reference.

Returning to Childcare Vouchers. Childcare vouchers are very under used scheme, which can save many parents with children aged up to 15, over £1,000 a year on childcare.

Where To Get Childcare Vouchers

They need to be offered via employers, but many large and small companies take part. Vouchers save the employer money as well as the employee – so if yours doesn’t offer the scheme get them to sign up now!

The key is it enables you to pay for childcare out of your PRE-TAX and National Insurance income. While this doesn’t sound much, the benefit is huge. Most employers operate it on a salary sacrifice system, which works something like this (basic rate tax example)… You give up £1,000 of salary over the year which is worth £700ish after tax. You get £1,000 of Childcare vouchers. This means you’re £300 better off per £1000 you “sacrifice.” Of course, once you no longer need to pay for childcare, you simply get your salary back.

BOTH parents are allowed to get a maximum of £243 per month worth of vouchers meaning some families will gain £1,000s from this over a year.

The Government has set a limit for childcare vouchers based on tax bands:

  • £243 each month for a Basic rate taxpayer
  • £124 each month for a Higher rate taxpayer
  • £110 each month for an Additional rate taxpayer

Some employers also allow their employees to take more than the capped amount. However, any extra childcare vouchers over the Government limit are not tax-free and NI-exempt.

It’s a really fantastic scheme, which is why you should make the most of it now before Tax-Free Childcare is introduced. If Childcare vouchers offer you a better deal than the new scheme, new entrants now will able to remain in that scheme when Tax-Free Childcare is phased in.

Vouchers tend to last for a long time, so if you know you’re going to have higher childcare costs during the holidays, collect vouchers in advance. Start saving them now, for next year’s summer holiday! However, they are non-refundable so don’t collect more than you plan to use.

2. Childcare Element of Working Tax Credits

There’s been lots of talk about tax credits recently and concerns over the proposed cuts, which are due to take effect next year. For working families these measures will obviously have an impact on their finances, which why it’s a relief to report that as far as I can tell the ‘Childcare Element’ of Working Tax Credits will remain the same.

However, your eligibility to receive Working Tax Credits, and the amount you get it likely to change in April 2016. The current eligibility criteria are complex and depend on the number of children you have, the cost of your childcare etc.

It comes down to the following: To qualify for childcare tax credit you must:

  • Be a single parent working 16+ hours a week
  • Be a couple both working 16+ hours a week
  • Household income under £41,000

NB

  • Some with household income above £41,000 may be eligible, especially if you have more than one child, or a disabled child.
  • Also, if either you or a partner are disabled you both may not need to work 16+ hours a week.

What to do

1. Check your eligibility. Call the tax credit helpline on 0345 300 3900 to see if you are eligible.

2. Find out how much you will get. You can currently get help for up to £300 a week.

3. Get paid directly into your bank or building society account each week or month.

If you’re married or living with someone, you must put in a joint application for tax credits. You can only put in a single claim if you don’t have a partner. If you’re a permanently separated couple, then you are counted as a single parent and the payment is made to the child’s main carer.

If your childcare costs go up – call the tax credits helpline and tell them about it as you may be able to get more money. If you forget to do it and you’re late then you can only backdate it for one month. If the costs go down, do the same as you’re then being overpaid and will have to give the money back…

With the proposed cuts it’s worth ensuring that you are getting all you are entitled to now.

Tax Credits Alert! If you are paying for childcare using Childcare Vouchers, these don’t count as paying for childcare. I know, it doesn’t make sense to me either. Therefore this could impact on the amount of tax credits you receive. Use this HMRC vouchers vs. credits calculator to see what’s the best way to proceed for you.

3. Free childcare for 3 or 4 year olds (and some 2 year olds) – EYE

You can also reduce the overall costs of childcare by claiming 15 hours per week free during term time, once your child is 3 years old. Younger children, 2 years and over, may also be eligible for free childcare if you meet certain criteria – click here for more details on eligibility.

Once your child is 3 years old all families can start claiming free early years education from any of these dates:

  • 1 September
  • 1 January
  • 1 April

Example: if your child was born on 12 February then they become eligible the term after they turn three, which will be from 1st April.

Funded hours can be used at ANY CHILDCARE FACILITY, not just Pre Schools…

At Pear Tree Childcare we offer the standard EYE (Early Year entitlement) over the 38 weeks at 15 hours per week or the stretched offer of 11 hours a week over 51 weeks. Funding can be split between two settings and also childminders.

nursery parent pack

Childcare Providers

All the above savings can be made when using a registered childcare provider. This includes after school and summer clubs, nurseries, playgroups, nannies, childminders and au pairs. Unfortunately this doesn’t include grandparents or friends and family unless they are a registered provider. You can ask your local council for a list of registered childcare providers in your area, or search using your postcode here.

Help with the cost of childcare is also available for students through Care2Learn or through study bursaries at your college. If you’re a student in Farnborough, North Camp / Aldershot or Pirbright / Woking and need help funding childcare at one of our nurseries please get in touch with us directly so we support you in this.

If you have any questions about any of the above, please leave a comment below. If you have inspired tips for saving on childcare costs, leave a comment; I’m sure readers would be very interested!

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