Essential Tips for Managing Your Childcare Costs

Essential Tips for Managing Your Childcare Costs

In recent years, there has been plenty of discussion about the increasing cost of childcare. Parents face difficult decisions about whether to return to work after their maternity leave or stay at home and look after their children themselves. These decisions are driven by ever-increasing childcare costs and the sizeable financial commitment involved.

We want parents to know what financial support is available to help manage childcare costs, so we’ve decided to write this blog. Although you can use some of the financial support available with childcare providers such as childminders, pre-schools, and others, our focus will primarily be on day nurseries.

Why Have Childcare Costs and Nursery Fees Become So Expensive?

Since the introduction of the National Living Wage in 2016, nursery groups like ours have had to significantly increase the salaries offered to staff. 

We support the call for increased salaries, particularly for childcare workers, and at Tommies Childcare, we pride ourselves on paying qualified staff more than the statutory rates of pay. We believe nursery nurses and practitioners have demanding jobs and should be paid fairly.

Recruitment for staff is at an all-time struggle, however. The talent pool for childcare staff has been affected by rigid qualification requirements and higher salaries offered in other professions. The result is that childcare providers must compete heavily on salaries to hire talented people, and childcare fees have had to increase to cover higher wages. 

More recently, though, the cost-of-living crisis has placed extreme pressure on families across the country. Although mortgage, rent, energy, and food costs are very high, childcare remains an essential service that enables parents to earn an income to cover their household expenses. 

As a provider, we have also seen our costs increase significantly. Alongside food prices, rising interest rates and the current lack of reasonable energy tariffs for businesses like ours mean we have had no choice but to increase our nursery fees. 

What Financial Support is Available to Help Cover Childcare Costs?

Let’s start with something you might already be aware of: nursery education funding (NEF) for 2, 3 and 4-year-olds. You may also be aware that this funding is due to be expanded. We’ll start by explaining what is currently available before moving on to what will soon change.

Nursery Education Funding (NEF) for 2, 3, and 4-Year-Olds

15 hours for 2-Year-Olds

Funding for 2-year-olds is currently offered at 15 hours per week during the academic term dates (38 weeks of the year). To claim this funding, your child must be 2 years old, and you must be in receipt of one of the following benefits:

  • Income Support
  • Income-based Job Seekers’ Allowance
  • Child Tax Credit, Working Tax Credit or Universal Credit if your annual household income is less than £16,190
  • Guaranteed Element of State Pension Credit
  • Support under Part VI of the Immigration and Asylum Act (1999)

Or, if your child:

  • Is looked after by the Local Authority
  • Has left care through Special Guardianship or an Adoption or Residence Order
  • Has a current Statement of Special Educational Needs (SEN) or an Education, Health and Care Plan
  • Qualifies for Disability Living Allowance

You must complete a Parent Declaration Form to apply for NEF (15 hours) for a 2-year-old. These can be obtained by speaking with a Nursery Manager, who can help you complete the application.

15 hours for 3 and 4-Year-Olds

All 3- and 4-year-olds are entitled to 15 hours per week of NEF, but you must still complete a Parent Declaration Form. You can also obtain one by speaking with a nursery manager. 

30 hours for 3 and 4-Year-Olds

Working families of 3- and 4-year-olds are entitled to 30 hours per week of NEF. To claim for this funding, you and any partner must each expect to earn (on average) at least £139.00 per week (equal to 16 hours at the National Minimum or Living Wage).

If you or your partner are on maternity, paternity, or adoption leave, or you cannot work because you are disabled or have caring responsibilities, you could still be eligible. 

You cannot claim the funding if you or your partner each expect to earn £100,000.00 or more per year. Please visit the Childcare Choices website for more details regarding eligibility.

Changes to NEF from April 2024

Families with children aged nine months and 2-years-old aren’t currently eligible for any funded childcare. However, the UK Government recently announced that:

  • From April 2024, all eligible working parents of 2-year-olds can access funding for 15 hours per week of education and care for 38 weeks of the year.
  • From September 2024, all eligible working parents of children aged 9 months up to 3 years old can access funding for 15 hours per week of education and care for 38 weeks of the year.
  • From September 2025, all eligible working parents of children aged 9 months up to 3 years old can access funding for 30 hours per week of education and care for 38 weeks of the year.

The UK Government has also confirmed that the 30-hour offer will start when maternity or paternity leave ends. There are no plans to provide funded childcare for children under 9 months.

Tax-Free Childcare

The tax-free childcare scheme was first introduced in April 2017. It provides parents a 20% tax relief on childcare services, amounting to £2,000 per year.

Tax-free childcare will eventually replace childcare vouchers. Since tax-free childcare was introduced, childcare vouchers were closed to new entrants. Only parents who claimed childcare vouchers before October 2018 can use them.

How Does it Work?

You can use the tax-free childcare scheme by creating an account through the government website. Once your account has been set up, you pay money into it like a bank account. The government then tops up your account with their contributions. 

Example: For every £8 you pay into the account; the government contributes £2

Anyone can contribute to your tax-free childcare account, so it’s an excellent way for relatives and extended family, such as grandparents, to help with childcare costs. You can contribute as much or as little as you want and build up credit to use later. There are no costs to using the scheme.

You can pay your childcare provider from your account if they are also signed up for the scheme. Please note that it can take up to 5 working days for the money to be transferred to a childcare provider, so make sure you plan your payments according to your childcare provider’s payment terms.

Is the scheme available to anyone?

The eligibility criteria for the tax-free childcare scheme are as follows:

  • Your child must be 11 years old or younger,
  • If your child has a disability, they will be eligible until they are 17.*
  • Tax-free childcare is only available for working parents.**
  • Self-employed parents are eligible.
  • You or your partner must not earn over £100,000 in the current tax year.
  • You must be a UK or European Economic Area (EEA) citizen.
  • Once you have applied, you must re-confirm your eligibility through your account portal every 3 months.

*The government will increase their contributions to a maximum of £4,000 per year for disabled children.

**You and your partner must work at least 16 hours at the National Minimum or Living Wage.

How do I apply for Tax-Free Childcare?

You can apply by visiting

When applying, you’ll need your National Insurance (NI) number or Unique Taxpayer Reference (UTR). You can only have one account per child, so you and your partner must decide who will register the account.

We hope you have found this information helpful. If you have any questions about the information provided, you’re welcome to get in touch any time, or alternatively, visit the Childcare Choices website.

Recent Posts

Start typing and press Enter to search