Childcare Angels

Ironically, the cost of childcare is often the reason many mums do not go back to work. And for many couples, it can often be the deciding factor in choosing not to have children at all.

Coping with the sleepless nights, the presumed non-existent social life and all the usual things us parents don’t bat an eyelid at anymore (until said single friend reminds us what life used to be like…) seem bearable, but we do protest when our hard-earned cash seem to dwindle before we’ve even been tempted to go on a shopping spree because we have nursery fees, or a nanny to pay.

At Joshua’s nursery, the comparison between the cost of fees and mortgages is a regular topic of conversation. But what surprises me is how few parents seem to be up to date on ways to reduce those fees. I seem to be directing people to all sorts of schemes and funds to cut the cost of childcare with every new parent I meet.

A good starting point is to look into:
n Tax Credits
n Childcare Affordability Programme
n Childcare Vouchers
n Child Benefit
n Nursery Education Grant

Tax Credits
Don’t let bad media attention put you off applying for tax credits – on the whole, people who are honest about how much they earn, and let the Inland Revenue know when their income changes are not left with hundreds of pounds to pay back. Don’t be one of the many parents losing out on £3.6 billion worth of tax credits a year.

If your family income is less than £58,175 per year (or £66,350 if you have a child less than one year of age) you may be able to claim Child Tax Credits or Working Tax Credits.

n Child Tax Credit
This is paid directly into the account of the person who looks after the child the most. As long as your family income does not exceed £58,175, or £66,350 for those with a child less than a year old, you can benefit whether you work or not.

n  Working Tax Credit
This tax credit is for employed families and includes some financial assistance towards the cost of childcare. To qualify, you need to use childcare that is registered or approved, e.g.:

n childminder
n nursery
n play scheme
n out-of-school club
n school

If you are a lone parent, you need to work for at least 16 hours a week to qualify. If you are a couple, you both need to wok at least 16 hours a week (unless one partner is disabled). The childcare element of the Working Tax Credit works on a sliding scale and can pay up to 80% of your childcare costs (up to a maximum of £175 per week, in 2008, if you’re paying childcare for one child, and a £300 maximum if you’re paying for two or more children). Again, the money is paid into the account of the main childcare provider.

To qualify, your family income must not exceed £58,175, or £66,350 for those with a child less than a year old.

Each case is viewed according to individual circumstances, so it would be pointless for me to show you an example – imagine thinking you’ll be getting hundreds of pounds off and then being told otherwise, or thinking you’ll get a measly tenner off and not bothering to apply, when you could get much more. The point it: get in touch with the Inland Revenue and let them give you an accurate forecast on what you are entitled to.

Childcare Affordability Programme
If you live in London and have children aged up to five years and you qualify for child tax credits, you could qualify for the Childcare Affordability Programme (in 2006/2007 this meant a saving of more than £547.50p).

Like tax credits, each case is viewed according to individual circumstances, so you’ll need to get in touch with the London Development Agency (who part-fund the scheme with Sure Start) to see if you qualify, and find out how much you could get.

Childcare Vouchers Scheme
Many employers have now signed up to a Childcare Vouchers scheme, allowing their employees to ‘sacrifice’ some of their gross salary in return for ‘vouchers’ that can be used to pay for childcare.

Basically, you can buy the first £55 (£243 each month) of your salary, free of tax or National Insurance, from your employer. That is, because you buy vouchers with your salary, the first £55 a week does not have tax or National Insurance contributions taken out of it – that is how you make a saving. This means that parents who pay a lower rate tax (22% if you earn less than £36,000) could save around £962 per year, and a higher rate taxpayer (those who pay 40%) saves around £1,195.

There are three schemes available:
1. Your employer gives YOU the childcare vouchers, which you give your approved childcare provider (nursery, childminder, nanny).

2. Your employer makes payments DIRECTLY to your childcare provider.

3. Your employer can provide childcare in the workplace to the value of your childcare voucher, and YOU pay the difference.

Most companies can join the scheme, so if you haven’t already, it could be well worth asking your HR department to see if your employer has signed up with one of the voucher providers. It’s worth mentioning that if you are able to claim certain benefits, you may find the childcare voucher scheme affects these, so find out before signing up.

Child benefit
When you register the birth of your child, you should get a form to fill out to claim child benefit. This is the one benefit you get regardless of your income and it’s the same rate for everyone – the only things that affect the amount is the age of your child and how many you have. The rates change incrementally every year, and you should get a letter from HMRC whenever there is a change to the rate, which thankfully usually go up. In 2008, the eldest child is entitled to £18.80, with each additional child getting £12.55.

Free part-time nursery places for three and four year olds
The government’s Nursery Education Grant entitles all three and four-year-old children to get up to 12.5 hours (increasing to 15 hours in 2010) of free childcare for 38 weeks of the year (basically during term time).

You need to speak with the nursery manager if your child is entitled, as some nurseries are not always proactive in letting parents know about this discount. It works out at £43.90 off your child’s nursery fees, which are paid directly to the nursery and taken off you bill. Your child’s nursery will give you a form to fill out, and will send it off to their borough.

If you find a childminder who works as part of a childminding network, they can also apply for the Nursery Education Grant for your child so you can get the same discount.