You could be missing out on childcare benefits
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Juggling a career and kids is one of the toughest challenges parents face, so the last thing you need is worries about childcare costs on top.
The good news is there’s a plethora of help out there. If you are a working parent and you haven’t already checked out what cash you might be eligible for, you need to act.
One of the big problems is that most people perceive benefits and tax credits to be only for those who are unemployed.
Yet people on family incomes of up to £66,000 can still get benefits. But people who work rarely bother to check out what they might get.
The result is that many families are missing out on money they’re entitled to, and when it comes to childcare costs, the amounts we are talking about can be huge.
Before I go on, when I’m talking about childcare, please don’t sit there thinking about a crying baby wrapped in a blanket.We’re talking about anything from nursery care through to after-school activity clubs for 15-year-olds.
If you have your kids looked after and the organisation you are paying is registered with the Care Commission (Scotland), Ofsted (England), Care Standards Inspectorate (Wales) or your local Health and Social Services Trust (Northern Ireland), then there’s a huge raft of entitlements possible.
Here’s how to make sure you don’t miss out:
1. Check out Child Tax Credits
Let me make it plain: the average payout on this tax credit is £68 a week, or £3,500 a year. It’s a simply mammoth amount, but lots of eligible people aren’t taking it up.
The problem is that actually working out whether or not you are entitled to anything can be phenomenally complicated.
To help, I’ve come up with a rule of thumb. If you pay for childcare and you are a couple both working more than 16 hours a week, or are a single parent doing the same, and you earn under £40,000 in total, then you should definitely check it out by calling the tax credit helpline on 0845 300 3900.
Unfortunately, I can only say “check-it out,” not “you’ll get the money”, as the variables are massive. But it’s a good idea. It’s also worth noting that some people earning over £40,000 may be eligible, but then it tends to be small potatoes.
If you fit the rule, you need to go to the tax office and see whether there’s money sitting there waiting to be claimed. It’s a huge amount.
The amount you get depends both on your financial situation and the amount you spend on childcare.
You can get 80 per cent of up to £175 a week for one child or up to £300 a week for two or more children.
2. Use childcare vouchers
This is an under-publicised government scheme which operates through employers.
It enables you to pay for childcare out of your pre-tax income. That doesn’t sound much, but the benefit is huge.
Think of it this way. For every £1,000 a basic rate taxpayer earns, they only take home around £700. If you trade that in — known as a salary sacrifice — for £1,000 of childcare vouchers, you are £300 better off per £1,000.
As both parents can claim this, and higher rate taxpayers get even more, there are some families who are a couple of thousand pounds better off each year using these vouchers.
The big problem with them is if your employer doesn’t offer them, you can’t get them.
So if it doesn’t, why not get together with other colleagues and ask your company if it will consider it?
It doesn’t cost them anything, and they can make a bit of cash by not having to make National Insurance contributions.
It is worth noting that there’s a trade-off between the Child Tax Credit and the childcare vouchers. So here’s another rough rule of thumb: if you earn over £16,000 a year, you could be better off using childcare vouchers, as well as the tax credit. If you earn less than £16,000, stick with just the tax credit.
You can find further details and exactly how this works at www.moneysavingexpert.com/childcare
3. Do you have a three- or four-year-old?
All three- and four-year-olds are entitled to 12.5 hours a week for up to 38 weeks a year in “early learning” classes. Your child gets extra education and you get free childcare at the same time.
You can find info at the Families Information Services (FIS) on 0800 234 6346.
4. Summer school places and activity clubs
Many schools offer free or discounted after-school clubs or courses at Easter or during the summer that will look after your children while you are at work.
One of the advantages is that it counts as paying for childcare under both tax credits and the childcare scheme, provided the scheme is officially registered, which they almost certainly will be.
One thing that catches people out is that they think their child can only go to a scheme at their own school. Not so. If your school doesn’t offer one, there aren’t enough places or you find something more suitable elsewhere, there’s no restriction on where your kids can go.