5 ways to get help with childcare costs

No parent needs to be told that having children is unspeakably expensive. Figures from the HL Savings & Resilience Barometer found that couples with kids spend almost £7,000 more every year than couples without. Over the course of 18 years, it means they’ll spend around £125,500 more. In the early years, covering childcare is perhaps the biggest challenge – either paying for care or working less to look after children, so we need all the help we can get. Here are five things worth considering.

Free childcare places

The good news is that free childcare was expanded this month. It has been available for children aged three and four for a while now, covering 30 hours of care a week during term time. It’s gradually being extended to younger kids too, and from April 6, working parents of two-year-olds have been eligible for 15 hours a week of free childcare during term time. This will be widened to include children from 9 months to 2-years from September, and then increased to 30 hours from September 2025.

This will make a massive difference to families who pay an average of £158 a week for a part-time nursery place for a child under 2 (25 hours). There are a few caveats though. If you need care beyond the school year, this works out at 11 hours a week, and nurseries may set boundaries on how you can use those hours. It doesn’t include ‘consumables’ either, so nurseries will be able to add charges for things like nappies and snacks. You also need to earn at least £183 a week to qualify – which works out as 16 hours on minimum wage – and less than £100,000. If you earn too little or too much, you won’t get this free care.

Tax-free childcare

If you have children under the age of 12, you can put money into the tax-free childcare account, and for every £8 you pay in, the government will add another £2. The system lets you claim up to £500 every three months – up to a total of £2,000 for each child. You can spend it on all sorts of approved care – from childminders to nurseries, nannies, after school care and holiday clubs. To qualify, you need to be working and earning at least the equivalent of minimum wage for 16 hours a week and both parents need to earn less than £100,000 each.

Childcare in benefits

There are childcare parts of Tax Credits and Universal Credit, so if you’re not receiving these, check whether you should update your claim. You might be able to claim 85% of childcare costs if you’re eligible for Universal Credit. Bear in mind, however, that if you receive these benefits, you can’t use the tax-free childcare scheme.

Help from family

A huge number of families couldn’t manage without the help of grandparents, but it doesn’t have to be a one-way street, because if they’re under state pension age and looking after a child under 12, they may be able to boost their state pension at the same time.

When a parent is receiving child benefit for a child under 12, they automatically get NI credits towards their state pension. If they’ve gone back to work and are paying NI, they won’t need it, so they can sign a form to give it to a grandparent offering care. To get the full new state pension you need 35 years of National Insurance payments or credits – so if a grandparents hasn’t yet hit this threshold, it will boost their state pension.

Child benefit

This is broader than simply covering childcare costs. It offers £1,331 a year for your first child, and £881 a year for second and subsequent children. It can be paid to either parent, but if either parents is stopping work for a period, it would benefit them to be the claimant, as claiming child benefit qualifies that parent for National Insurance credits.

Higher earners have to pay at least some of it back, but the good news is that the threshold at which you start to repay moved on 6 April from £50,000 to £60,000, and the rate at which you have to pay it back halved, so you only need to repay it all by the time you make £80,000.

If you’re over the upper threshold, you may think there’s no point claiming child benefit, but if you still need the NI credits, you can contact the Child Benefit Office and say you want to claim the benefits but opt out of payments. This means you will no longer receive the money, but you will still receive the credits.

• Sarah Coles is a personal finance analyst at Hargreaves Lansdown and co-presents Switch Your Money On podcast.

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