10 Smart ways to minimise your childcare costs

30 hours free childcare

Best care for children is the topmost priority of every parent. However, the best facilities always come at a cost. Childcare costs in the UK are among the highest as compared to other European countries. No wonder selecting childcare options and opting for Government aid schemes to save on childcare plays an important part in the life of working parents.


Its’ a real dilemma for parents to decide to turn up as full-time childcare at home as oppose to work outside, which requires spending over childcare. It can be taxing to manage the earning from the job versus the expenses against childcare and it can be a tough financial balancing act.


Below are the options for various payable services available for childcare in UK at the disposal of working parents.

You can either choose one of them or combinations of followings:

  • Au pair: This can be a low-cost option but parents are required to check for possible Government restrictions such as au pair is generally a female helper from a foreign country with certain age criteria. Typically, au pair stays with you and can help with childcare along with other household work for some monetary gains. On the other hand, you are not responsible for their tax and NI contributions.
  • Childminder: A Childminder is a self-employed childcare specialist who is registered with Ofsted or an equivalent organization (Care Inspectorate (Scotland), Care and Social Services Inspectorate (Wales), Health and Social Services Trust (Northern Ireland)). It is quite a popular option that parents may consider since childminder are self-employed so they are responsible for their tax and NI contributions.
  • Children-center: Some local authorities offer childcare for 2 to 4-year-old children. This might not be an option available in all areas but this is a low-cost option and many services may be free of cost. Similar to ‘Playgroup’, parents can use a free weekly childcare allowance.
  • Crèches: This option is specifically for short-duration childcare. Parents can look for this option for short-duration during the day while they do something else on the same premises.
  • Nursery: Day nurseries are meant for childcare for children age up to five years. With this option, childcare cost is relatively expensive as compared to the childminder. They work with fixed timings (working hours) and are only available on working days. You can check with the nursery for accepting childcare vouchers against childcare costs.
  • Nanny: Nanny can be thought of as an extended family member. They may or may not stay with you. If not living with you then they can come in early and stay late to help children with breakfast, dropping off and picking up from school, and then looking after them from after school hours till parents get back home. Although this option is convenient it is one of the costliest options. Parents need to understand that they are responsible for taxes and NI contributions for a nanny as in this case they become an employer. It can be a single point of failure as you have to find an alternate option if the nanny is off on some days due to annual leave or due to leave because of some unforeseen reasons.
  • Playgroup or pre-schools: As the name suggests, this option proposes an idea of childcare with some play and learning. However, this option is specific for children age between 2 to 4 years. This option is not suitable for parents looking for full-day childcare. This is a low-cost option and you can utilize your free weekly childcare allowance if your child is of age 3 or 4. Childcare vouchers can also be used with registered playgroups or you can submit a claim for the childcare element of working tax credit.


Every family might have a different situation and hence need to be smart to weigh the above options to suit their needs.


Below are the 10 ways you can save on your childcare costs:


    1. Free childcare benefit: Based on the eligibility, parents can opt for 15 or 30 hours of free childcare per week for 38 weeks (during school term) out of 52 weeks of the year.
        • 15 hours free childcare: You can claim for 15-hour childcare benefit if:
          • Your child/children age is between 3-4 years
          • Working parents clause is not mandatory
          • Living in England
        • 30 hours free childcare: You can claim for 30-hour childcare benefit if:
          • Your child/children age is between 3-4 years
          • You (and your partner if one) are working for a minimum of 16 hours/week and at least getting a minimum national wage.
          • Living in England
  1. Childcare vouchers: This is a great way to save some costs on childcare. Working parents can use childcare vouchers to pay for registered childcare. Parents can save on their tax and National Insurance contributions using this option. However, Childcare Vouchers are closed to new entrants in October 2018 but the option is available for anyone already availing. You are not allowed to use childcare vouchers if you are already utilizing the ‘Tax-Free childcare’ scheme.
  2. Tax-free childcare: Essentially this is a money-back scheme where you get 20% money-back on childcare costs. The thing to remember is that Govt will provide you a maximum of £2,000 a year per child (£4,000 if a child is disabled) if a childcare cost is more than £10,000 a year. £2,000 is divided into 4 quarters which means that you can claim up to £500 per quarter per child.
    • If eligible, You can use Tax-Free Childcare at the same time as using 15 hours or 30 hours free childcare.
    • Eligibility:
    • You are eligible if you (and your partner if one) are working in the UK with a minimum national wage or 16 hours/week and your (or partner’s) salary is not more than £100,000/year
    • Child/children, age is 11 years or under.

E.g. Let’s say you avail this scheme and your

childcare cost per month = £600

Govt pay back per month = £120

Annual Savings on childcare cost = £1440 (£7200 – £5760)


  1. Universal Credit and Childcare: This scheme is meant for parents who possess universal credit and can claim back up to 85% of childcare costs with a maximum monthly limit of £646 for one child or £1108 for 2 or more children. It is highly recommended to check your eligibility for this scheme before applying for ‘Tax-free childcare’ as it is likely to cover most of your childcare costs. However, you won’t be able to get Tax free childcare benefit if you get a ‘Universal Credit and childcare’ scheme.

If eligible, you can also get 30 hours of free childcare.


  • You (and your partner if one) are UK working (minimum hours working criteria is not applicable) and total family income is less than £40,000/year.
  • Child/Children are age up to 16 years

Note: You have to open an online universal credit account on the Government website.


  1. Guarding State Pension: If you are not working or don’t pay National Insurance (NI) contributions due to less earning, then that might create a gap in your NI record.

If you have a child under 12, availing of childcare benefits can get you NI credits which you can use for the state pension.


  1. Move to low-cost areas: Childcare cost varies based on area and hence it makes sense to look for such areas where costs of living are not high with low-cost childcare expenses.


  1. Look for ways to save time and money on fuel: It is a good option to look for a childcare center that is close to home or office or on the way to the office. It will give quick access to children and will save on travel time.


  1. Check for childcare facilities at the workplace: Many organizations nowadays are quite considerate and provide options for childcare at the workplace. It’s worth checking for such options at either of the parent’s workplaces. It may or may not be a subsidized service but one may prefer convenience over little cost.


  1. Look for flexible working hours: Parents may request flexible working hours or work in different shifts to fit with your childcare. This way parents can do childcare alternatively or this way parents can reduce the number of hours they have to keep their child/children at the childcare center.


  1. Family or friend: You can think of this option if you have parents or friends to help take care of your children during the week to save on childcare costs.


Hope the above information is helpful to choose the right childcare option and selecting various Government aid schemes to save on childcare costs. At CoreAdviz we have a team of experts with a good understanding of these matters and you may wish to connect with us for getting more information and assistance with tax-saving queries.