How to cope with price of parenting
This is a wealth warning for all parents: the summer holidays are coming. And while the children get time off, that doesn't mean you do.
The cost of trying to ensure they are safe and supervised while you do your job can be prohibitive. Luckily, there are a number of childcare schemes that can help you cut the cost, even if you only use them during the summer.
One problem is that people tend to think such schemes only apply to babies and not teenagers. Actually, these provisions are generally for those up to the age of 16, although there are slight eligibility differences between the schemes.
For most to work they need be registered with Ofsted or the Scottish Commission for the Regulation of Care. Don't worry too much about this though; most legitimate nurseries, school clubs, playgroups, childminders and even some au pair agencies are.
Childcare tax credits can cover up to 70 per cent of your childcare costs
● Free and subsidised summer clubs
The first places to check are local schools. Many offer special summer clubs for children and these are not necessarily academic. They include activities as diverse as street art and archery.
Your child isn't only restricted to going to their own school though - check other schools in the area to see if they offer anything that would suit them better. These can be a useful and cost-effective way of making sure your children are looked after and supervised during the summer. Local councils will often have details.
As for the cost, sometimes they are free, sometimes not. Yet if you do have to pay, these school summer clubs are often eligible for childcare tax credits or take childcare vouchers (both described below).
● Childcare tax credits
Even if you only pay for childcare in the summer, you may be eligible for childcare tax credits. While the name sounds complex, it simply means you may get cash to cover some of your costs - and we can be talking serious money here as it can cover up to 70 per cent of your childcare costs. The cash is paid directly into your bank account.
My rule of thumb for eligibility is that if you are a single parent who works more than 16 hours a week, or a couple who both work more than 16 hours a week, it is worth checking whether you can get credits, if you have total annual family income under £42,000.
Note that I say it is worth checking out, not that you will definitely get the credits. That is because the equation is complicated, so it is impossible to be much clearer. Actually, some families with earnings as high as £70,000 may still be eligible in rare cases, but at that high level the amounts gained are small. For those who only pay for childcare during the summer, that is when you will get your payments, a much-improved system as, until 2010, they were spread throughout the year.
● Childcare vouchers
Childcare vouchers are a government scheme, which can save many parents more than £1,000 a year. Although they need to be offered by your employer, many large and small companies take part.
The key to these is that they enable you to pay for childcare from your pre-tax and national insurance income. That may not sound like much but the benefit is huge.
Most employers use a 'salary sacrifice' scheme, which works something like this: you give up £1,000 of salary, which is only worth £700 in a basic taxpayer's pocket. In return for that, you get £1,000 of childcare vouchers. In other words, you are £300 per £1,000 better off.
Once you no longer need the vouchers the company replaces your vouchers with salary.
Both parents are allowed to get a maximum of £243 of vouchers a month from their own employer. However, higher-rate tax payers who have joined the scheme since April are only allowed around half of that. If you joined before, you can still get the larger amount.
There is one all-important warning about vouchers that should be noted: getting them can reduce the amount of tax credits you are eligible for. So much so that in a certain cases some people lose more tax credits than they save with the vouchers, meaning they are worse off.
This is because the amount of tax credits you get depends on what you pay for childcare, but paying in vouchers does not count towards that amount. So if you pay £100 a week for childcare, but use £60 of vouchers, for tax credit purposes you have only paid £40.
But do not let this automatically put you off. If you are not eligible for tax credits, it is a no-brainer; use the vouchers as you will save money.
If you do get tax credits and have childcare costs of more than £175 a week, or £300 for two children, you are still better off using the vouchers. Otherwise, for those with family income under £42,000 there is a government calculator and other tools you can use to check.
Full further information on how to do this is at www.moneysavingexpert.com/childcare