UK childcare costs and financial support for parents

In his autumn statement, the chancellor announced extra support for working parents which is now being rolled out. Here we explain what support is available to parents and how to claim it.

Childcare is one of the biggest costs facing parents in the UK. From April 1, the government began extending free childcare provision to younger children so that eligible working parents of two-year-olds can now claim. Previously, the scheme was only open to three- and four-year-olds.

By September 2025, working parents will be able to claim 30 hours of free childcare a week. This will be over 38 weeks of the year, from nine months up to your child starting school. 

In this article, we cover:

• How expensive is UK childcare?
• What is the tax-free UK childcare scheme?
• Is my child eligible for free UK childcare?
• Who is eligible for tax-free childcare and how do I apply?
• How does free childcare work for 3 and 4 year olds?
• What private schemes might be available?

Watch the video below for our three top tips on how to ease the financial strain of childcare.

How expensive is UK childcare?

Make no mistake about it, childcare is eye-wateringly expensive and the cost is rising. According to the free Moneyhelper service, the average cost of childcare for a child under two is:

• Part-time (25 hours) = £148.63 a week or £7,210/year
• Full-time (50 hours) = £300 a week or £14,030/year

The average cost for five days a week use of an after-school club is £67.42/week.

According to the charity Coram, a full-time place for a three-year-old at nursery will set you back £5,100 per year on average.

How much does the government give for UK childcare?

Currently, working parents with three and four-year-olds are eligible for 30 hours of free childcare a week. This scheme has now started to be extended out to younger children.

From April 1, eligible working parents of two-year-olds have been able to access 15 hours of free childcare a week. This will then be extended to those working parents of nine-month-olds to two-year-olds from September 2024.

The plan is that from September 2025 all eligible working parents of children aged from nine months to three years will be able to access the full 30 free hours per week. The provision only applies within term-time, so 38 weeks of the year.

This policy change applies to households:

• where all adults work at least 16 hours
• where both working parents individually earn between £8,670 (from April 2023) up to £100,000 a year
• living in England

What government help is available to parents?

There are a number of schemes and help available for working parents, including:

• Tax-free childcare for working families
• 15 or 30 hours free childcare for two to four-year-olds
• Child benefit
• Universal credit

You can find out more about these below.

How do childcare costs work if you receive universal credit?

Working families claiming universal credit, who aren’t receiving tax-free childcare, may be eligible for up to 85% of their childcare costs, up to the maximum amount per month (2024/25) of:

• £1,014.63 for one child
• £1,739.37 for 2 or more children

You will need to pay for the cost of childcare yourself and then report it to Universal Credit. You can find out more on the government website.

What is the tax-free UK childcare scheme?

Many working parents take advantage of the tax-free government funded childcare schemes available to help with childcare costs. This includes:

• nurseries, childminders, and nannies
• after school clubs and play schemes

Under the scheme, the government gives you financial support worth £2 for every £8 you pay for childcare. This is up to a maximum of £2,000 per child every year up to the age of 11.

The money is paid via an online childcare account that you set up for your child. You need to check that your nursery provider or childminder is signed up to the scheme.

If your child is disabled, this figure increases to £1,000 every 3 months, up to £4,000 a year.

Am I eligible for tax-free childcare?

Your eligibility is determined by a number of factors:

• whether you (and your partner – if you have one) are working
  • working parents can usually receive it if they are in full time or part time work, on sick leave or annual leave or on shared parental, maternity, paternity or adoption leave
• your income (and your partner’s income)
  • You (and your partner) will need to earn at least the National Minimum Wage or Living Wage for 16 hours a week on average
  • Both parents must each earn less than £100,000 a year, including bonuses
• the age of your child and their circumstances
  • Your child must be 11 or under
  • They must usually live with you
• your immigration status

You are not eligible for tax-free childcare at the same time as claiming:

• Working Tax Credit
• Child Tax Credit
• Universal Credit
• childcare vouchers

Use the government’s childcare calculator to work out which type of support is best for you and your child.

Is my child eligible for free UK childcare?

You could also get free childcare for two- to four-year-olds in England. This is another government scheme which starts from the term after your child’s third birthday:

• From April 1, two- to four-year-olds can get 570 free hours per year
• It’s usually taken as 15 hours a week for 38 weeks of the year
• You can choose to take fewer hours over more weeks
• You may still have to pay for additional costs like meals or nappies

Again, this is applied for with an online childcare account: register for the code and give it to your childcare provider. Eligibility is very similar to tax-free childcare:

• It must be through an approved childcare provider
• You need to be working
• You need to earn less than £100,000 a year
• If one partner does not work, you will not be able to get the full 30 hours, but will still qualify for 15 hours
• You will not be eligible if your child does not usually live with you

NOTE: It is up to your childcare provider how they interpret the scheme. Some may not even offer the free hours, while others may charge for additional expenses. Start your search as soon as possible.

Other private schemes and discounts

You may get a helping hand from the childcare providers themselves. Some nurseries may offer discounts, most commonly if you send more or one child to them.

If you are employed, check whether your employer offers extra support or perks. For example, extra days off for child-related emergencies, or free emergency childcare when your child is ill or your child-minder is off sick. 

There may also be cheaper childcare provider solutions available, which could include:

• subsidised nursery at your workplace
• community nurseries
• child-minders
• nanny share – a friend or nanny that looks after their own child as well as yours
• au pairs – covering some of their living expenses can help subsidise costs

It can also be useful to find other parents in the same boat for rotas and after-school playdates to ease the load.

Also, although not necessarily a cheaper option, there are now apps and online services that can provide last-minute childcare if you really get stuck.

You may also be entitled to child benefit, which is money paid to parents and guardians by the government to help with the cost of raising their children.

Five more ways to cut the cost of childcare

1. Local community resources

You can check with your local authority to see what information is available about childcare and children’s activities in your area. 

Many boroughs will have children’s centres that host weekly activities. Most run over term time, but there should be some events in the holidays.

These activities may include “stay and play” sessions, and gardening and cooking clubs. They will either be free or you may be charged a small fee.

Check local Facebook pages, church halls or the website of your local authority for details. 

2. Childcare pooling

Parents could team up to share childcare.

Some might take it in turns to look after the children for a certain number of hours. Others prefer to all be in one place at the same time, with parents taking it in turns to work from another room.

3. Grandparents or family members 

About a third of British grandparents help with childcare, averaging about 10 hours a week, according to the children’s charity, Coram Group.

Grandparents providing childcare for grandchildren under the age of 12 may qualify for national insurance credits that could give their state pension a boost. 

It is estimated that thousands of grandparents are not aware they can claim credits, missing out on the chance to boost their retirement income. You can find out more on the government’s website.

4. Flexible working 

You may be able to start and finish work at times that suit you which could potentially reduce the childcare hours that you need.

Some organisations support term-time working, meaning that you do not have to find childcare for the school holidays.

5. Get your child benefit

Don’t forget child benefit is paid to parents and guardians to help with the cost of raising children. 

For the 2024-25 tax year, the rates are:

• Eldest child or only child: £25.60 a week
• Subsequent children: £16.95 a week

If you or your partner earns more than £60,000, you may have to pay some of the benefit back. If one earns above £80,000, you lose all of the benefit.

Got a question for our mentors? Drop us an email and we’ll get it answered.