Help with childcare costs for working parents
Can you claim?
Many working families are not claiming money they are entitled to. Make sure you're not missing out.
Working Tax Credit and the 'childcare element'
Tax Credits are payments from the government. Child Tax Credit (CTC) and Working Tax Credit (WTC) support families with children and working people on low incomes. Nine out of ten families with children can claim tax credits.
The Child Tax Credit is for families with one or more children, and is based on the household income. You do not have to be working to claim Child Tax Credit. If you're responsible for any children under the age of 16, or under 20 if they're in full-time education or approved training, you may be able to claim Child Tax Credit to help with the cost of looking after them.
Working Tax Credit is for people who are in paid work (16 hours or more) and is one of the ways in which families can get financial help towards childcare and activities for older children.
The childcare element of the Working Tax Credit is to help with childcare costs for registered or approved childcare, and it can pay up to 70% of eligible childcare costs. This is up to a maximum award of £175 a week for one child and £300 a week for two or more children. This includes all types of childcare, for example nurseries, playschemes, childminders, foster carers, school-based activities and out of school clubs.
The amount that you receive will depend on your income - the lower the income, the more tax credits you can get. You can calculate how much support you can receive through WTC by using the HMRC calculator online.
To find out more about how much you may get and to request a claim form please call the Tax Credit Helpline on 0845 300 3900, textphone 0845 300 3909 (open 8.00am to 8.00pm seven days a week). For further information on tax credits please visit the HMRC website or Directgov.
Childcare vouchers provide a way for employers to help workers with the costs of childcare. You can choose to swap or 'sacrifice' part of your salary for a childcare voucher. Childcare vouchers enable you to pay for childcare from your pre-tax salary and doesn't cost your employer anything. This means you don't pay tax or insurance on childcare vouchers (up to £55 per week) and you could save over £1,000 per year.
If you already receive the childcare element of Working Tax Credit and want to know whether you would be better off with childcare vouchers, please go to the childcare indicator calculator.
You should always base any decision you make on your individual circumstances, but generally:
- Families will benefit from accepting childcare vouchers in return for a salary sacrifice if the amount of their qualifying childcare costs are greater than the current childcare limits (£175 a week for one child, £300 for two or more children)
- Families who are receiving tax credits at the family element or less (£545 or less) will gain from claiming the tax and NI exemption from the childcare vouchers
To help you decide there are a number of questions, answers and examples of how childcare vouchers and tax credits interact on the HMRC website. You should fully understand the effect of a reduction in pay and any potential effect on your entitlement to a State Pension, benefits and tax credits before entering in to a salary sacrifice agreement.
Right to request flexible working from your employer
Parents with children aged under 16, or under 18 if the child is disabled, have the right to ask their employer to work flexibly. This could mean:
- Hours worked, such as starting later to take a child to nursery
- Times of work, such as working part-time to fit in with a childminder
- Place of work, such as working at home some or all of the time
Anyone can ask their employer for flexible work arrangements, but the law provides some employees with the statutory right to request a flexible working pattern. For details please visit the flexible working and work-life balance page on Directgov.
Other rights that help you take time off work to care for others are:
- Parental leave, where you can book blocks of unpaid time off to care for young children (13 weeks for children up to their fifth birthday or 18 weeks for disabled children up to their 18th birthday)
- Time off for dependents, which gives you unpaid time off to cope with family emergencies
Always check your contract of employment and with the Human Resources section for your employers working policies.
For impartial information and advice on money matters please visit the Money Advice Service website.
This page was last updated on 4 January 2012