Paying for childcare during COVID19 – advice for parents

Childcare has been a prominent issue during COVID19 with many parents having to balance childcare, work and schooling from home. With many childcare providers reopening, and children beginning to return to childcare, whether with childminders, day care or other settings, now is a good time for parents to make sure they are receiving all the financial support they are entitled to with their childcare costs.

Most parents will be eligible for some form of financial support, and we have included some guidance below on action you may need to take now, if you receive support through one or more of the following schemes:

Childcare Vouchers

Due to reduced childcare bills during COVID19, some parents may have temporarily reduced or paused their payments into their Childcare Voucher account from their salary. We advise all parents using this scheme to review their accounts and to increase or resume payments to make the most of the financial savings the scheme offers (up to £933 per parent, per year). Speak to your employer to find out more or call Employers For Childcare on 0800 028 3008.

Childcare Vouchers are closed to new entrants so are only available to those already using the scheme through their current employer. Parents will only remain eligible for the scheme provided they make at least one payment into their Childcare Voucher account in each 52 week period.

Tax-Free Childcare

Tax-Free Childcare has replaced Childcare Vouchers for new claimants, and allows eligible parents to save 20% of their childcare costs up to a maximum of £2,000 per year, per child (up to £4,000 for a child with a disability).

To be eligible for Tax-Free Childcare:

  • Both parents, or one parent in a single-parent household, must be working, earning between £139.52 per week and £100,000 per year.
  • Self-employed parents are eligible to join.

Tax-Free Childcare can be used to pay for registered childcare for children under the age of 12 (under age 17 for children with a disability).

Temporary changes have been made to the income and earnings eligibility criteria for Tax-Free Childcare due to COVID-19. The changes may affect you if you, or someone you live with, are:

  • on furlough
  • not able to work or are working less
  • self-employed and have seen a reduction in earnings.

All other eligibility criteria for the scheme remain the same, for example, you cannot apply for Tax-Free Childcare at the same time as you are in receipt of Universal Credit or Tax Credits.

Read more about this here.

Tax Credits

If you are currently in receipt of Tax Credits and your circumstances have changed, you must inform Tax Credits to ensure that you are not being over or underpaid. If you expect there to be a fall (or rise) in your annual household income of more than £2,500 this year, compared to 2019-2020, then reporting your income may result in a change to your award within this tax year. Also ensure that you have informed Tax Credits of any changes in your childcare costs, particularly if your childcare costs are based on an average amount.

Universal Credit

Universal Credit has replaced Tax Credits for new benefits claimants and can pay up to 85% of registered childcare costs. Universal Credit receives the information regarding your income directly from HMRC, but you must ensure that you upload any receipts or other proof of payment of childcare costs to your UC journal, within each assessment period, to ensure that the childcare is included in your payments.

You are not alone

We know this is a complicated landscape. With a wide range of financial support schemes available it can be complex working out what you are entitled to, or what is best for your family. We can help – our Family Benefits Advice Service can carry out a personalised ‘better off’ calculation, based on your unique circumstances. It’s free, impartial and confidential. Contact us on 028 9267 8200 or email