Which? Money-Saving Monday: Cut the costs of childcare

As the impact of the cost of living crisis hits home for millions of people, Which? highlights ways to save money on childcare, often one of the biggest fixed costs for families.

Childcare is expensive and often complicated to figure out – the average cost for a part-time nursery place is £7,000. A recent survey found that parents are now paying 2.5 per cent more for childcare for children under two. Studies also show that the cost of living crisis is exacerbating unaffordable fees. 

Another survey found that two-thirds of respondents said they are paying as much or more for childcare than for rent or mortgage payments, and one in four parents are claiming to have had to cut down on necessary expenses such as food, heating or clothing to afford childcare.

Which? has rounded up a number of ways to help cut costs. The best options will depend on personal circumstances, but there is some government and local support available, or parents can try alternative ways of saving money, such as arranging childcare with a friend or family member. 

1. Working parents can claim tax-free childcare

Tax-free childcare is a government scheme that pays working parents a top-up based on their childcare costs. Parents can claim up to £500 every three months for each child looked after by an approved childcare provider, sent via an online account. Parents that meet the eligibility criteria can apply through HMRC.

2. Check if you’re eligible for tax credits or Universal Credit

Both Working Tax Credit and Universal Credit offer extra support for families, where the government gives the recipient extra money towards paying for childcare. 

To qualify for Working Tax Credit, the person claiming, and their partner, must both work at least 16 hours a week. One person can be out of work if they are entitled to carer’s allowance, in prison, in hospital, or incapacitated. It is possible to save up to 70 per cent of childcare costs, up to a maximum of £175 per week for one child, or £300 for two or more children.

Similarly, people claiming Universal Credit can get 85 per cent of their childcare costs covered, to a maximum of £646 a month for one child, or £1,108 for two or more children.

3. Take advantage of free childcare hours

In England, there are schemes available for parents with very young children. The ‘free childcare for two-year-olds’ scheme is for those who receive certain benefits. In addition, everyone is eligible for 15 hours of free childcare per week for children aged three or four. This is for 38 weeks a year, but parents can opt to take fewer hours to spread this over more weeks. Those on lower incomes might be able to claim 30 hours of free childcare a week, as long as they and their partners are earning at least the national minimum wage or living wage. 

In Scotland, all three and four-year-olds are entitled to around 30 hours of free childcare a year. There is also a scheme for two-year-olds for those on certain benefits and low incomes.

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. 

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.

4. Don’t forget about child benefit

While not childcare specific, child benefit payments from the government can help ease the cost of childcare. For the 2022-23 tax year, parents can claim £21.80 for their first child and an extra £14.45 a week for any additional children. Parents will be paid child benefit until their child turns 16 – or until they turn 21 if they’re in an approved form of education or training.

It is worth noting that child benefit is not means-tested. However, if one parent earns more than £50,000 a year, they will incur a tax charge on the money received. If they earn more than £60,000 a year, they will have to pay back all of the benefits received. Even so, Which? suggests it is worth registering and just opting out of the payments, as parents will receive National Insurance credits while they are off work.

5. Try ‘parent sharing’ with a friend

For parents with friends who have similar schedules and childcare needs, a cheaper or free childcare option is to consider looking after each other’s children. While this erases the advantage of professional childcare, it allows children to socialise.

6. Get grandparents involved

Grandparents are often the first port of call to help with childcare, although many are unaware that they might qualify for benefits as a result. Grandparents who are not already retired and looking after a child under the age of 12, may qualify for National Insurance credits, and time spent caring counts towards their state pension eligibility.

7. Find cheap and free holiday activities

Which? found a number of cheap and free activities to keep children entertained during school holidays. Coram Family and Childcare lists organisations in local areas and provides information about childcare and family services. There are often youth groups and community centres which offer some form of help during the holidays.

Many local councils offer free events and activities during school holidays, so it is worth checking their websites.

8. Check out local charities

Organisations such as the YMCA, local church groups or local authority play schemes could be good places to check for free after-school clubs and classes. These are intended for parents who are unable to pick their children up after school, which can save a lot of money compared to a nanny or childminder. However, services can be limited to only serving certain schools in the local area.

Reena Sewraz, Which? Money expert, said:

“The cost of living crisis is putting a huge strain on household finances, with millions of families struggling to make ends meet. 

“Childcare is a necessity for working parents but can be extremely expensive. In many cases, it is one of the biggest financial commitments after housing costs, so it is extremely worrying that many are struggling to pay for it.

“There are a number of schemes available from the government to help alleviate some of the costs of childcare. However, these won’t be an option for everyone. There are also alternative ways to save money, such as parent sharing or asking family members to help out, while local charities and councils might also offer free after-school clubs and classes.”


Notes to editors: 

  • To claim tax-free childcare, the following eligibility criteria applies: both you and your partner, if you have one, must be in work (or be on sick leave, annual leave, or parental leave) and earning at least national minimum wage or living wage for 16 hours a week. You can be self-employed. If you are, the earning limits don’t apply if you started your business less than a year ago. You can’t claim if you or your partner earn more than £100,000. Your child or children must be aged 11 or under. Adopted children qualify, but foster children do not. You can receive payments for children with disabilities up to 17-years old.
  • A survey by Pregnant then Screwed and Mumsnet (25 March 2022) looked into the impact childcare costs are having on families. The survey of 26,962 parents of young children found that 62 per cent of respondents said that the cost of childcare is now the same or more than their rent/mortgage. 
  • According to the NCT, parents now pay an average of over £7,000 per year, for just a part-time nursery place.
  • Coram’s 21st annual Childcare Survey found that parents are now paying 2.5 per cent more for childcare for children under two.

Further Reading: 

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