Money Advice Service

Thinking about going back to work after having a baby? You could get extra tax credits to help with the cost of childcare. There’s also help available if you’re a single parent on benefits, or a student returning to your studies.

Tax credits

Did you know?

The average tax credit payout for childcare is more than £60 per week.

Source: MoneySavingExpert

It’s often said that the cost of childcare puts parents off returning to work. It’s true that childcare isn’t cheap.

However, the childcare element of Working Tax Credit is designed to help cover some of the cost, so if you are eligible you’ll still normally gain by working.

It can be worth up to £122.50 a week (or £210 if you have more than one child). And you could be eligible whether you’re employed or self-employed.

Do you qualify for extra tax credits?

In most cases you have to work for 16 hours a week to qualify, and you must use registered or approved childcare. This can include childminders, playgroups, nurseries or someone who looks after a child in your home.

How much help can you get?

You can get help with up to 70% of your childcare costs, based on a maximum of £175 a week for one child or £300 a week if you have two or more children.

That works out as:

  • up to £122.50 a week for one child, or
  • up to £210 a week for two or more children

You won’t necessarily get the full £122.50 or £210 a week – the actual amount you get will depend on your income, the hours you work and your childcare costs. The lower your income, the more tax credits you can get.

Case study

“I’ve been wanting to go back to work for a while now, but it’s really expensive to put Tom into nursery for five days. Even four days, with Andy’s parents looking after him on Fridays, was going to cost a huge chunk of my salary. Because Andy earns a good wage, we didn’t think we’d be eligible for tax credits, but it turns out we are… almost £100 a week.” – Gayle

How to claim

If you’re new to tax credits you’ll need to get a claim form – just call the Tax Credits helpline. They are also the people you’ll need to speak to if you’re already in the system and want to start claiming for help with childcare costs.

Call the Tax Credits helpline on 0345 300 3900

Changes to tax credits starting in April 2017

From April 2017, if you are making a new claim, support will be limited to the first two children (unless you have a multiple birth) and you will no longer be able to claim the family element.

Disabled children are protected and you will still be able to claim the disabled child premium for any of your children who are eligible to get it.

If you are already claiming Child Tax Credit and have more than two children, you won’t be affected by the changes.

Tax credits and Universal Credit

Universal Credit is a new benefit which is gradually replacing tax credits (and other benefits). It’s being introduced in stages and for now mainly affects people who are newly unemployed.

Universal Credit will be paid as a single monthly payment that will include a standard allowance plus other ‘elements’ - for example for childcare. So the amount you get will depend on your circumstances.

If you’re already claiming tax credits for help with childcare costs, then the Tax Credit Office will tell you when you should claim Universal Credit instead.

If you’re claiming help for the first time you will be told whether to claim Universal Credit or tax credits.

From April 2017, if you are making a new claim for Universal Credit, support will be limited to the first two children (unless you have a multiple birth) and the first child premium will no longer be available.

If you are already claiming UC, you probably won’t be affected by the changes.

Other help with childcare costs

If you’re a single parent returning to work after a period on benefits, you may qualify for help with childcare costs. You can find out more at your local Jobcentre Plus (or Jobs and Benefits Office in Northern Ireland).

Help with childcare costs for students

Just because you have children, it doesn’t mean you have to put your studies on hold. There is a surprising amount of childcare help available – everything from grants and vouchers to free crèche places.

Contact the student support or welfare officer at your college or speak to a guidance teacher at school.

Depending on where you live, there are also a number of websites for student parents that explain what support is available to you.

New childcare scheme

There’s a new tax-free childcare scheme due to be introduced from April 2017. It’s an alternative to claiming tax credits for help with childcare costs. Under this system, you’ll get 20% of your yearly childcare bill paid for by government.

The way it will work is as follows:

  • You open an online account through GOV.UK and pay into it to cover your childcare costs.
  • The government then tops up your account with a 20% contribution (the same as the basic rate of tax), up to a maximum contribution of £2,000 a year per child.

It’s going to be available to families with children under 12 where both parents are working (and working single parents) and are not already claiming tax credits to help with childcare costs.

The new scheme doesn’t rely on employers offering the scheme. You can even use it if you’re self-employed.

It’s due to be rolled out to all eligible parents by the end of the year.

Find out more about the new childcare scheme on the GOV.UK website

This article is provided by the Money Advice Service.