Parents are Confused About Childcare Support
Almost half of new mums are confused about the Government’s support for the cost of childcare. A new report by the Social Mobility and Child Poverty Commission reveals that 47% of first-time mums either don’t know that the Government offers financial help with childcare at all, or are aware of help but do not know how to claim it.
The results also showed that 57% of low income parents would like to work more hours, but are deterred by the cost of childcare.
These results mirror Employers For Childcare’s 2015 Childcare Cost Survey results. We found that 51% of local parents were unsure that they were claiming all the financial help available to them. 46% of the same sample of parents reduced their working hours or left work altogether because of the high cost of childcare.
Help with the cost of childcare
There is help available to parents with the cost of childcare. The two main forms of assistance are Childcare Vouchers and Tax Credits:
- Childcare Vouchers: the Childcare Voucher scheme is a salary sacrifice scheme, meaning that if your employer offers it as a staff benefit you can choose to take part of your salary as a Childcare Voucher. You can sacrifice up to £243 per month to put towards your childcare bill. This amount is tax and National Insurance Contribution free, meaning that you could save £77 per month. If both parents join the scheme savings can amount to over £1,860 per year.
- Tax Credits: the Childcare Element of Working Tax Credit can pay up to 70% of an eligible family’s childcare bill.
The parents of pre-school children (aged 3-4) can also avail of a preschool education place which provides free preschool for 12.5 hours per week, 38 weeks per year.
Research shows that many parents are simply unaware of the support available to them and are not making savings on their childcare bill.
Changes are coming
There are a series of changes to childcare support in the pipeline, most of which will begin next year.
In early 2017 a new form of support called Tax-Free Childcare will be available. The Tax-Free Childcare scheme will allow eligible working families to claim 20% of their childcare costs, up to £2,000 per child per year, or £4,000 for a child with a disability, from the Government.
Once Tax-Free Childcare is introduced the Childcare Voucher scheme will close to new entrants. If you are not a member of the Childcare Voucher scheme you will therefore not have the choice of which scheme will be best for your circumstances. Once you leave the Childcare Voucher scheme, you cannot join it again, even if you will be better off financially. It is vital that parents understand the implications of joining the Tax-Free Childcare scheme before making any decisions.
Universal Credit, which is already being phased in in England, will begin implementation in Northern Ireland in early 2017. It will replace Tax Credits. Under Universal Credit the Childcare Element will increase to 85% of registered childcare costs, an increase on the current Tax Credits maximum of 70% of costs.
In 2017 there will be four forms of support with the cost of childcare: Childcare Vouchers, Tax-Free Childcare, Tax Credits and Universal Credit. It is crucial that parents are aware of the coming changes to financial support as it will become even more difficult to navigate the types of help available, and, vitally, which types will be more financially beneficial in each family’s circumstances.
Family Benefits Advice Service
In 2010 Employers For Childcare set up a Family Benefits Advice Service with the aim of advising parents on the financial support available to their family. We carry out free, personalised benefits and entitlement checks for parents.
If you would like more information on the support your family could be entitled to please speak to one of our Advisors on Freephone helpline 0800 028 6538.