Five ways to cut the cost of childcare
Finding someone to look after the kids can be a real drain on your finances. Here are five ways to help you keep your costs down...
Paying out for childcare can work out to be very expensive. So we've come up with some top tips to help you keep the costs of your childcare as low as possible.
Friends and family
Perhaps the most obvious childcare route is to get any willing (and available) family members or friends to look after your children. But if you are going to do this, you need to be careful.
Under the Childcare Act, anyone looking after your child for more than two hours a day before 6pm (or after 2am), or for more than 14 days a year, outside of the child's own home must be registered as a childminder. Under guidelines, this means the childminder must complete a criminal record check, learn first aid, take a childcare course, and pay an annual fee to Ofsted.
While this doesn't apply to close relatives of children - such as grandparents, siblings, aunts or uncles - it does apply to your next-door neighbour or your best friend.
One final point to note is that if you're part of a babysitting circle, you shouldn't need to register as a childminder because most babysitting takes place after 6pm. However, if you regularly babysit before 6pm, you will need to be registered. Babysitting should also be carried out in the child's own home. Similarly, sleepovers would be exempt, unless they occurred at the same address more than 14 times in a year.
Childcare tax credits
If you work for 16 hours or more a week (if you're a couple, you must both work more than 16 hours a week) and pay for childcare at the same time, you could qualify for the childcare element of Working Tax Credits to help you with your costs. (Note, this is not the same as Child Tax Credits.) How much you receive will depend on your household income - but if this is under £40,000, it's likely you'll be able to make a claim.
The childcare element of the Working Tax Credit can help you with up to 70% of your childcare costs, based on a maximum of £175 per week for one child, and a maximum of £300 per week if you're paying for two or more children.
To qualify, the childcare provider you use must be registered with Ofsted - for a quick way to find out whether your local childcare provider is registered, check out Childcare Link.
Unfortunately, the tax credits system is incredibly complicated, so for an easy way to find out whether you qualify, take the HMRC questionnaire or call the tax credit helpline on 0845 300 3900. You can read more about tax credits here.
No matter what your income, all working parents are entitled to childcare vouchers. These are part of a government scheme which can save each working parent up to £624 each year in childcare costs for higher-rate taxpayers (£1,196 if you signed up before the rules changed on 6th April 2011), and up to £904 per year for basic-rate taxpayers.
The scheme allows parents to sacrifice some of their gross salary in return for vouchers which can be put towards the cost of childcare - this means you'll avoid having to pay tax or National Insurance on this amount.
Parents who are basic-rate taxpayers are allowed to receive a maximum of £243-worth of vouchers each month, higher-rate taxpayers up to £124 a month and additional-rate taxpayers up to £97 a month. Pretty much any form of registered and approved childcare can be funded with vouchers - such as childminders, day nurseries, registered nannies, breakfast and after school clubs and holiday clubs.
The downside is that if you receive these vouchers, it can affect the amount you receive in tax credits (if you're eligible). Fortunately there's a nifty calculator to help you decide whether you're better off having childcare vouchers or the childcare element of Working Tax Credit.
If you are better off having vouchers, it's well worth finding out whether your employer offers a voucher scheme - even if it doesn't, you could try to convince your employer to start one as it doesn't cost anything to set up, and could save your employer up to £227 per employee each year through reduced National Insurance payments.
Hiring your own 'Mary Poppins' to look after your kids at home can do some serious damage to your bank balance. But thanks to websites such as nannyshare.co.uk and thenannysharers.co.uk you can now share a nanny with another family!
These websites allow you to search for families in your area that are also looking for childcare. Once you've done that all you need to do is hire a nanny and split the costs. It's that simple!
School holidays always come round quickly, so if you're looking for childcare during these holidays, it's well worth checking to see whether there are any holiday clubs at the school itself, or at local leisure centres or churches.
Some schools will also hold after-school clubs during term time for working parents who can't pick up their kids at 3.30pm on the dot. To find out more about holiday schemes in your area, check out the Directgov website.
Finally, don't forget to check out our How to cut the cost of having a baby guide for more helpful tips on cutting the cost of having kids!
This is a classic lovemoney article that has been updated