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4 ways to reduce tax on savings interest
07 Jul 2024
The average cost of sending a child under the age of two to nursery or to a childminder in Great Britain is:
Part-time (25 hours a week) | Full-time (50 hours a week) | |
---|---|---|
Nursery | £148.63 | £285.31 |
Childminder | £125.91 | £247.19 |
Childcare isn't cheap, and while the government has promised more support, parents with young children may be caught in a situation where they can't afford to go back to work. In this guide, we explain ways to ease the pressure on your budget.
In this guide, we explain the childcare schemes available to help parents - including tax-free childcare. Whether you're working, not working, on a low income or higher income, there are several options to help you pay for childcare.
However, these options can't all be claimed at the same time, so you'll have to choose which one best suits your circumstances.
Tax-free childcare is a government scheme that pays working parents a 25% top-up based on what they pay for childcare. You can get up to a maximum of £2,000 a year, which is given when parents pay out at least £10,000.
The scheme was launched in April 2017, and is the main option for parents who are in work.
You (and your partner, if you have one) must be in work, or getting parental leave, sick leave or annual leave. If you're employed, you must both earn at least national minimum wage or living wage for 16 hours a week.
If you're self-employed and started your business less than 12 months ago, the earnings limit doesn't apply to you.
You can get up to £500 every three months for each child.
The government will pay 25% of what you pay an approved childcare provider via an online account. The provider must be approved for you to get the 25%.
The childcare element of working tax credit is designed to help parents on low incomes who are in work pay for childcare, to help them stay in employment.
You and your partner, if you have one, must work at least 16 hours a week to be eligible. If one of you is not working it must be because they're either incapacitated, in hospital, in prison or entitled to carer's allowance.
You can get paid up to 70% of what you pay for childcare, up to a maximum of £175 per week for one child, or £300 a week for two or more children.
This initiative will offer childcare for the term after your child's second birthday, and finishing the term after their third birthday.
It offers up to 15 hours a week of free childcare, for 38 weeks per year. It can only be used with an approved childcare provider.
Your child must be two years old, you must live in England and you must receive one of the following benefits:
You can also be eligible if your child is:
You may be able to get free early learning and childcare for two-year-olds in Scotland, and there's the Flying Start programme in Wales for young children living in disadvantaged communities.
Eligibility criteria and services you get are different to what's on offer in England, so it's best to check on the respective government websites.
Unfortunately, there are no schemes to provide free childcare for children under two in Northern Ireland. But all parents of children aged between three- and four-years-old can apply to receive 12.5 hours per week of free preschool education.
You won't get paid, but you'll benefit from free services.
All children in England that fall in this age range are eligible for 15 free hours of childcare a week for 38 weeks a year. Care must be from an approved childcare provider.
Everyone is eligible for 15 hours of free childcare. You may be able to get 30 hours free childcare a week if you or your partner are in work and earn at least the national minimum wage or living wage.
If either parent is on maternity, paternity or adoption leave, or is unable to work due to disability or caring responsibilities, then you may still be eligible.
However, neither parent can earn more than £100,000 a year to use the scheme.
You won't get paid. The funding is sent to your childcare provider from your local council, so you'll benefit from free services.
In the 2023 Spring Budget, Chancellor Jeremy Hunt announced plans to extend 30 hours free childcare to parents of children aged as young as nine months to reduce childcare costs and encourage parents back into work.
This is set to be rolled out gradually, with 15 hours childcare for two-year-olds being introduced from April 2024, which is then extended to children aged nine months from September 2024. 30 hours free childcare for all children under school age is then set to be available from September 2025.
In Scotland, all three and four-year-olds are entitled to 30 hours free childcare a week during term-time. There is also a scheme for two-year-olds if you receive certain benefits and are on a low income.
In Wales, all three and four-year-olds can get 30 hours of free childcare a week. The 30 hours is made up of a minimum of 10 hours of early education a week and a maximum of 20 hours a week of childcare.
If you're in Northern Ireland, three and four-year-olds get 12 and a half hours of free childcare per week during term time through a funded preschool place.
The government's new benefits model is being rolled out across the UK. If you've already been moved on to Universal Credit, it will replace your tax credits and other income-related benefits.
You must already be eligible to claim the main element of Universal Credit.
To qualify for the childcare element, you must both be in work if you're part of a couple, unless one of you has limited capability for work, regular and substantial caring responsibilities for a severely disabled person or are absent in prison, hospital or residential care.
You'll get 85% of childcare costs covered, up to a maximum of £646.35 per month for one child, or £1,108.04 for two or more children.
The Chancellor announced in his Spring Budget on 15 March that the amount parents on Universal Credit can claim back on childcare will rise to £951 per month for one child and to £1,630 for two or more children, but did not specify when this would come into effect.
Find out more: how much Universal Credit will I get?
The childcare voucher scheme is now closed to new applicants. If you're already enrolled, you may continue using the scheme for as long as your employer offers it.
Childcare vouchers are given out to employees by employers who decide to run the scheme. You swap your wages for the vouchers, which must be spent on approved childcare providers.
You can take up to £55 a week of your wages as childcare vouchers. This means basic-rate taxpayers could gain £930 a year per parent, higher-rate taxpayers might get £624 a year and top-rate taxpayers can get £590.
Find out more: Which? Money podcast - childcare cost crisis
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