20 November 2012
The cost of child care is making it prohibitively expensive for both parents to work in some families, and others may be paying more than they need to.
While choosing who cares for your children is a very personal decision, there are steps you can take to ensure that high-quality child care is also cost-effective. It's worth reviewing your options regularly as your children get older and making sure you're getting the help you need.
* Taking the long view: The cost of child care does not stay static as your children grow up, so if you're terrified by the cost of day nursery for your baby, rest assured that costs will fall as he or she gets older and the ratio of children to adults required for good-quality care begins to fall.
According to the Daycare Trust, the average cost of 25 hours' care in a nursery for a child under two is £103. However, in England, once your child is three, they are entitled to a state-funded nursery place, which can help dramatically with costs. You can use this entitlement to get a place in a nursery attached to a state primary school, which will usually offer either morning or afternoon sessions.
If this doesn't fit in with your working patterns, you may be able to use your entitlement at a private nursery that offers longer days, and top it up with your own money for the extra time. By the time your child is in school, you need pay only for an after-school club, which costs an average of £40 for 15 hours - enough to ensure that you do not have to pick up your chidlren until 6 o'clock every night of the week.
* Get your entitlement: As well as the nursery grant mentioned above, some families are eligible for more help with child care. Some families will be eligible for free nursery places from two years old from September 2013, in a scheme that is expected to be rolled out nationally from 2014. The 20% most deprived families in an area will be entitled to the places. Working tax credits are another source of help for those on low incomes who need to pay for child care. Help is available for working parents up to 70% towards the costs of child care up to a maximum of £175 per week for one child and £300 per week for two or more children.
The actual amount you receive will depend on your income and your child care costs. If you're a single parent you must work 16 hours or more per week to be eligible for the credit.
If you are part of a couple, both you and your partner need to be in paid employment of 16 or more hours a week. However, you will also be eligible if one of you works 16 or more hours per week and the other does not work, but is in hospital, in prison, entitled to Carer's Allowance or incapacitated for child care purposes. The child care you use must be registered.
* Vouch for it: For those whose income is too high to be eligible for tax credits, child care voucheres can help with the cost. These vouchers are taken out of your income before tax and Naitonal Insurance, and can then be used to pay for Ofsted-registered child care.
Savings from the vouchers can be large - the maximum a basic-rate taxpayer can save is £930 a year. If you have been in a child care voucher scheme since before April 2011 and are a higher or additional-rate taxpayer you can save even more, £1,225 and £1,516 respectively.
Newer entrants to vouchers schemes face a tougher regime. Basic-rate taxpayers are allowed to buy £243 worth of vouchers every momth, but higher and additional-rate taxpayers can take less (£124 and £97 respectively), which limits their gains. The maximum annual gains for new entrants paying higher or additional-rate tax are £620 and £600 a year respectively.
Once you have received the vouchers, you can use them to pay for any Ofsted-registered child care for children up to 15, including some summer holiday clubs. You can also set them against some independent school costs, including boarding school fees. Not all employers offer the vouchers, but if yours doesn't you could try putting the option to them.
* Know your options: Some child care is cpeaper than others. At the top of the expense scale come professional nannies and some expensive day nurseries. If your nanny is Ofsted-registered you can use vouchers to pay him or her, which can help with the cost. However, not all are, and because you employ him or her you will be liable for tax and for any maternity pay.
Child minders, who are self-employed and look after your children in their own home instead of yours, are often cheaper still. They are Ofsted-registered, so you can use child care vouchers. Another option, if you have older children and a spare room, you could consider employing an au pair in exchange for bed, board and 'pocket money' of £70 to £80 a week.
Some sites: http://www.childcare.co.uk/?gclid=CNC5i7id3rMCFSbMtAod0EcA8A and https://www.gov.uk/help-with-childcare-costs