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Help with childcare costs

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Falling pregnant is an exciting time but with a new baby comes physical, emotional and financial challenges. One of the biggest stretches on a family’s finances is childcare costs, with an average full time place costing £11,000 a year. If you live in London you could be looking at £14,000 a year – childcare does not come cheap.

Luckily for you, we have some tips on how to cut your childcare costs. We’re helpful like that!

How much does childcare cost?

Going back to work after having a baby can be bitter-sweet. You go back to earn money to support the family and find you are then faced by crippling childcare costs. Nursery costs increased by 5% last year, which is faster than inflation and wages over the same time period.

If you had two children in full time nursery places in London, you would need £28,000 to cover the fees; this is higher than the average salary in the UK. It seems pretty impossible that you could work, pay your bills and feed your family on top of these costs.

Nurseries insist that they play an important part in younger children’s development, getting them ready for school and building essential life skills. You could actually send a child to private school for an academic year for roughly £9000, less than it costs to pack of your 3 year old to nursery!

Childcare costs are the second largest cost to parents after education, the average cost of a nursery place for a child under 2 is £4.26 per hour. This is even higher in London, where parents pay an average of £5.33 per hour and the average cost of a childminder looking after a child under 2 is £3.93 per hour.

Children in childcare

What other options are there?

Another option is to use a nanny, someone who cares for your child in your home and in some cases, lives with you. Nannies cost between £250 and £500 per week depending on their workload, some will undertake housework so if this option appeals to you, be prepared to pay for it.

Some parents even share a nanny to cut costs. As you would be their employer, you may have to pay their tax and national insurance so it’s always best to speak to the HMRC to find out first.

Nannies can provide one on one care for your child, where nurseries offer a more social experience with several children to a member of staff, so you lose that one on one attention a nanny can give.

Childminders and nurseries have to be registered with Ofsted, whereas nannies can register voluntarily. All of them are able to provide and educational programme so parents main concerns are usually opening times, location and cost.

What help is available towards childcare costs?

Childcare vouchers can help; not all businesses offer these but if your company does, sign yourself up for them. They work by you opting to sacrifice some of your salary. You allow your employer to take out an amount equal to your childcare costs; this is deducted before your income tax and national insurance. You therefore save on tax and national insurance, if both partners work for a company offering childcare vouchers; you can effectively double your savings.

All parents can claim up to £55 per week or £243 per month of vouchers, exempt from tax and national insurance. This limit also applies to higher rate taxpayers who were members of a scheme before 5 April 2011. Those who joined after this date have had their allowance reduced a family consisting of two working parents can receive up to £1860 a year to cover childcare costs.

From 2015 the government will run a new campaign that will help with 20% of working family’s childcare costs up to £6000 or £1200 per child per year. This new scheme will succeed the old childcare voucher system previously mentioned; the voucher scheme will continue to run for existing users though.

All families with children under 5 will be eligible and by 2020 the scheme will include all children under 12. Parents will sign up with a voucher provider online; the government will then top up payments at a rate of 20p for every 80p the family puts in.

Employer supported childcare

Free nursery hours?

Did you know that parents of 3 year olds qualify for free nursery education for up to 15 hours per week? You can take advantage of this in the school term after your child’s third birthday. They can receive 15 hours of free nursery care over 38 weeks of the year.

If you receive working tax credit you may be able to get some help with childcare costs. HMRC will pay up to 70% of your total childcare cost so they are well worth ringing up to see if they can help you before you take the plunge and sign your little one up for a nursery,childminder or nanny.

 

 

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