Childcare costs outstrip earnings: how to get help
Think tank warns over childcare costs. We explain all the help you can tap into
- (opens in new tab)
- (opens in new tab)
- (opens in new tab)
- Look After My Bills Newsletter Newsletter

Childcare costs are outstripping earnings for tens of thousands of low income households, think tank IPPR [Institute for Public Policy Research (opens in new tab)] has warned.
It costs an average £138 a week for a part-time (25 hours) nursery place for a child under the age of two. For full time (50 hours), it’s an average of £269.86, or £14,030 a year, according to Coram’s Family and Childcare report.
The average disposable household income (opens in new tab) is £31,000 - meaning many families could be spending almost 50% of their income on childcare, leaving little to cope with other rising living costs.
The IPPR says the “complex and incomplete patchwork” of childcare entitlements, benefits and allowances for working parents in England is leaving many struggling with costs often outstripping potential earnings.
It argues that rising childcare costs as parents increase their working hours amounts to a tax on workers.
IPPR’s associate director, Rachel Statham, said: “As the cost-of-living crisis pushes more families into financial stress, rising childcare costs are increasingly unaffordable and risk pushing parents of young children out of the workforce altogether.
“We urgently need reform to simplify and expand childcare provision. It’s time for a childcare guarantee to lower barriers for parents getting back into or getting on in work, to reduce costs for families with children, and to ensure every child has access to high quality early years education.”
The IPPR has called for 15 hours of free childcare to be made available to all pre-school children; currently, it is only available to children aged three to four. IPPR said this would close the gap between the end of parental leave and the current start of free available childcare hours.
Help with childcare costs
The government has had very little to say about tackling rising childcare costs - although there was a small mention at the start on Kwasi Kwarteng's 'mini-budget', there are no details as of yet as to how the government plans to help families. In there meantime, here is a run-down of the help you can tap into to help with childcare costs.
Tax-free childcare - get up to £2,000 a year
HMRC estimates around 1.3 million families are missing out on up to £2,000 (or £4,000 if you have a disabled child) of help towards childcare costs by not using the tax-free childcare allowance.
If you are a working parent with children under age 11 (17 if you have a disabled child) and earn at least £152 a week and less than £100,000 - you can get a £2 boost for every £8 you pay for childcare. See our article on tax-free childcare for details on how the scheme works and how to apply for it.
Tax-free childcare is not available to you if you are using the childcare voucher scheme via your employer. The childcare voucher scheme is closed to new entrants, but you can move to the tax free childcare scheme. You might however, be better-off with childcare vouchers if you have children older than age 11 or are on certain benefits - use the government’s childcare calculator (opens in new tab) to work out which scheme would be better for you.
Child benefit - who can get it?
Thousands of families are failing to claim child benefit despite being entitled to it - possibly due to the complex rules around it.
If you have a child under age 16 (or 20 if they are still in education) then you can claim child benefit worth £21.80 per week for your first child and then it’s £14.45 for additional children.
But, there are some rules which impact exactly how much you get:
- If you and your partner earn less than £50,000 each, you can claim and keep the full amount
- If you or your partner earn between £50,000 and £60,000 each, then the High Income Child Benefit Charge kicks in and means you will have to pay some of it back as extra income tax; this is 1% of the child benefit for every £100 of the income between £50,000 and £60,000. You pay this back by completing a self-assessment tax return.
- If you or your partner earn over £60,000 then you will pay a tax charge that essentially cancels out the payment. But, you should still register for it so that you benefit from National Insurance credit, which then counts towards your state pension. If you are not working, then without the credit, you could face a state pension shortfall of as much as £20,000.
How to get 30 hours of free childcare
If your child is between the ages of three and four, you could get as much as 30 hours’ free childcare per child. It's available in England (there are different schemes in Scotland, Wales and Northern Ireland). To be eligible, you must be working and earn at least £120 a week and neither you nor your partner earn more than £100,000 per year.
If you don’t qualify for 30 hours’ free, three to four-year-olds can still get 15 hours of free childcare per week.
Help via Universal Credit
If you’re on Universal Credit, you could claim back up to 85% of childcare costs for a maximum of up to £646 for one child and £1,108 for two children - as long as you use a registered childcare provider and proof of costs.
Kalpana is the Digital Editor of sister site MoneyWeek.
She’s an award-winning journalist and author of Invest Now: The Simple Guide to Boosting Your Finances and a children's book Get to Know Money - with extensive experience in financial journalism. Her work includes writing for a number of media outlets, including national papers and well-known women’s lifestyle and luxury titles, where she was finance editor for Cosmopolitan, Good Housekeeping, Red and Prima.
She started her career at the Financial Times group, covering pensions and investments.
As a money expert, Kalpana is a regular guest on TV and radio; appearances include BBC One’s Morning Live, ITV’s Eat Well, Save Well, Sky News and Channel 5's 30 money saving tips series.
She was also the resident money expert for the BBC Money 101 podcast.
A well-known money and consumer journalist, Kalpana also often speaks at events.
She is passionate about helping people be better with their money, save more and be smarter spenders.
Follow her on Twitter and Instagram @KalpanaFitz.
-
-
State pension age rise to 68 could be delayed - what it means for your retirement
The state pension age may stay at current levels for longer than expected after the government reportedly shelved plans to increase it to 68 by the late 2030s. We explain what it all means for you
By Stephanie Baxter • Published
-
Get more for your money with a stocks and shares ISA
A stocks and shares ISA could grow your money faster than a cash ISA. But what is it exactly and who is it suitable for?
By Ruth Emery • Published
-
Inflation rises to 10.4% as food prices surge: what does it mean for you?
As prices rise again, household finances are coming under a lot more pressure. We look at what’s increased and why, and how you can beat inflation
By Stephanie Baxter • Published
-
Selling VHS tapes: could your old videotape be worth over $25k?
Some VHS tapes can fetch a small fortune. If you’ve still got boxes of old 80s and 90s cassette tapes, it could be time to dust them off to try and make some cash. We explain what to check for and how to sell them
By Sue Hayward • Published
-
Tesco to slash triple Clubcard voucher exchange perk
Saving up and swapping your Tesco Clubcard vouchers to save money on treats like days out has always been a big part of the supermarket’s popular loyalty scheme.
By Sue Hayward • Published
-
Paying at the pump: why is my payment card pre-authorised for up to £120 when I fill up?
If you choose to ‘pay at the pump’ when filling up with fuel, your payment card could be pre-authorised for up to £120. We explain why this happens and what it means for motorists
By Sue Hayward • Published
-
TV Licence fee could see biggest rise in 20 years from 2024 – what are your options?
It’s time to ask whether you really need a TV Licence, as prices will rise in 2024 - we go through your options
By Vaishali Varu • Published
-
Alcohol duty freeze – what does it mean for the price of a pint?
Jeremy Hunt postpones the expected alcohol duty rise and cuts the price of draught beer – we have all the details
By Vaishali Varu • Published
-
Free childcare for working parents – how much could it save you?
We reveal how the government’s extended childcare support framework can help save working parents up to £6,500 a year
By Stephanie Baxter • Published
-
Spring Budget 2023: key takeaways
From extensions to the Energy Price Guarantee to greater levels of free childcare, what does Jeremy Hunt’s Budget mean for your finances?
By John Fitzsimons • Published