How to budget for childcare costs

One of the first decisions you’ll likely need to make is what kind of childcare you prefer for your child. Sometimes, this might be dictated by availability and price, but it’s good to think about what type of care might suit your family’s needs best.

A nursery setting generally hosts more children in an environment that is somewhere between a home and a school in look and feel. Your child might be looked after by multiple members of staff, but they will usually have a key worker, who they form a bond with. Nurseries are quite a reliable form of childcare, as they do not fall through when one staff member is sick, and often have a choice of different hours available.

A childminder will usually look after your child in their own home, and be their sole carer while you are working. This often means a lovely, close bond, but also means that if your childminder is ill, you will need to arrange other care or take time off work yourself. Childminders also may not offer full time hours.

A nanny usually cares for your child in your own home, and may work flexibly – which could be ideal if you have a job that requires you to work evenings and weekends. Similar to a childminder, a nanny may require a backup option for if they are ill, and you will need to file paperwork via HMRC to officially employ the nanny.

How much your childcare costs will depend on your choice of childcare and where you live. It can vary wildly from city to city, even within the UK, so it’s always best to find out the rates of your local preferred childcare provider so that you can budget accurately. However, the average cost of childcare in Britain for a full-time place (50 hours per week) is £269.86 per week, or £14,030 per year, while a part time place (25 hours per week) is £138.70 per week, or £7,210.

If those figures make you want to weep, it’s worth remembering that there is some help available in the form of government support with childcare costs, which can be broadly divided into three categories: tax free childcare, free childcare hours and the childcare element of working tax credit.

Tax-Free childcare allows you to save 20p for every pound you pay for childcare, up to a limit of £500 every three months (this goes up to £1,000 every three months for children with a disability). It’s available for children up to the age of 11 with any Ofsted registered provider. You need to have an account set up, which you can pay into from your bank account, and pay out directly to your childcare provider once the government top up has been added.

The free childcare hours are the talk of the town at present, as the government recently announced a big shake up and additional eligibility. All parents are currently entitled to 15 hours of free childcare for children over three years old, with those who meet the eligibility criteria being entitled to 30 hours per week. From April 2024, eligible parents will be able to claim 15 hours of free childcare, with children over 9 months being eligible from September 2024. By September 2025, all eligible parents of children over 9 months old will be able to claim 30 hours of free childcare per week .

Eligibility for both of these schemes depends mainly on how many hours you work and how much you earn. Households in which any parent earns more than £100,000 per year are not eligible for the additional hours or tax- free childcare, The childcare element of working tax credit is means-tested. Visit the government website or Citizen’s Advice to find out more.