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Warning: Save £1,000s on childcare before it’s too late – From Moneysavingexpert

Warning: Save £1,000s on childcare before it’s too late While the PM’s touting more free hours for 3 & 4yr-olds, there’s a hidden big change to urgently consider

This week, new plans were announced to give working parents in England with 3 or 4yr-olds 30 hrs/wk of free childcare. If made law, pilot schemes will start in Sep 2016 (though there’s scepticism whether it’s deliverable). Yet there are other, more urgent, big changes coming.

  1. Are you due childcare tax credits (avg payout £3,000)? Our rule of thumb is: “If you pay for childcare and work 16+hrs a week, or are a couple both working 16+hrs, and have total family income under £46,000, check if you’re eligible.” Note – we’re not saying you ARE eligible, just that it’s worth checking. Read Am I due childcare tax credits?

  2. Does your employer offer childcare vouchers? Here you trade in pre-tax salary for vouchers to spend on childcare. Eg, to get £1,000 of vouchers, you forgo £1,000 of salary, but after basic-rate tax & NI that’s only worth £700ish in your pay packet, so you’re £300 up. Anyone can do this, even if their partner doesn’t work, provided their employer offers it. See our Childcare Vouchers guide.

  3. Childcare vouchers end in autumn UNLESS you sign up beforehand. And from then, ‘Tax-Free Childcare’ starts. Working parents (if a couple, both must work) can put £80 in an account to pay for childcare and £20 is added (max addition £2,000/yr per child). See full Tax-Free Childcare info. At that point, the current childcare voucher scheme closes to new applicants. Each scheme has winners and losers, so you need to decide ASAP which is best for you. See our full analysis on childcare vouchers vs Tax-Free Childcare.

  4. Free childcare for 3 & 4-year-olds. In England, for a min 38wks a year you’re entitled to 15hrs/wk of free childcare. From 2017 (earlier for some) this could double to 30 hours free per week. In Scotland, Wales and Northern Ireland, you’ll still get between around 10-15hrs/wk, but it varies by country. See free childcare info to see if you qualify.

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