How to save money on childcare

Childcare is an enormous expense for London families – on average, about a third of parents’ income. In fact, a recent report by the Child Poverty Action Group revealed that childcare costs in London are around 50% higher than in cheaper areas of the UK.

With costs sky-high, it’s no wonder parents are seeking relief. There are quite a few ways for parents to save on childcare costs: the ‘Tax-Free Childcare’ scheme, part-time childcare, nanny share, 30 hours free childcare, working tax credits, and more. Some of these are really worth going after, some not so much. Since all of us want to save money on childcare if we can, it’s important to know your options.

So, let’s break it down.

Save on childcare costs with Tax-Free Childcare

Since early 2017, the government’s ‘Tax-Free Childcare’ scheme offers to pay 20% of your yearly costs, up to a maximum of £2,000 per child (£4000 if the child is disabled). You pay money into your tax free childcare account, and the government top it up – think of it as £2 extra for every £8 you pay in. You can use the balance to pay your childcare provider directly.

The Tax-Free Childcare scheme can be used to pay for approved childcare, which means:

• A registered childminder, nanny, playscheme, nursery or club
• A childminder or nanny with a registered childminder or childcare agency
• A registered school
• A home care worker working for a registered agency

Can I use Tax-Free Childcare to pay for my nanny?

Technically you can pay a nanny with Tax-Free Childcare. However, they must register with Ofsted, and most nannies don’t. For part time nannies the cost of going through the pre-registration training outweighs any potential savings for the parent. The time investment is also a challenge, especially if your nanny is a student and not planning for a long-term career in childcare. Most Koru Kids nannies aren’t Ofsted-registered for this reason (although they are strictly vetted and DBS checked).

If your nanny works a lot of hours, getting them Ofsted-registered might be beneficial, but you’ll have to ask them if they’re happy to. We might be able to help you organise Ofsted registration for your nanny (at your cost) – if you’re a Koru Kids family get in touch and we can discuss on a case-by-case basis. You can also find out more on nanny Ofsted registration here.

Can I use Tax-Free Childcare to pay my childminder?

Yes, you should be able to pay a childminder with Tax-Free Childcare. Families can only use their Tax-Free Childcare accounts to pay for Ofsted-registered childcare, and by law, childminders must be registered with Ofsted or an Ofsted approved agency (like Koru Kids). That means any childminder should be eligible to accept payments via this scheme. 
If you send your child to a Koru Kids Home Nursery (our outstanding childminding service), you can use your tax free childcare account to pay Koru Kids directly – as we are the Ofsted-registered body. We’ll pass these funds on to our childminders.

Am I eligible for Tax-Free Childcare?

• You can usually get Tax-Free Childcare if you (and your partner) are working, or on leave (such as sick leave, annual leave, or parental leave)
• Self-employed work counts
• You and your partner must be working at least 16 hours a week and earn the national minimum wage
• Your child or children must be 11 or younger
• You can’t get Tax-Free Childcare at the same time as claiming Working Tax Credit, Child Tax Credit, Universal Credit or Childcare Vouchers
• If either parent earns more than £100,000 per year, or less than £115 per week, you won’t be eligible for tax free childcare
• You can’t use Tax-Free Childcare to pay for compulsory education or private lessons during school time

You can check your eligibility for Tax-Free Childcare here.

Save on childcare costs with Childcare Vouchers

Many large workplaces used to offer a Childcare Voucher scheme which allowed parents to pay for childcare out of their pre-tax salary via ‘salary sacrifice’. For example, if you gave up £1000 of your salary pre-tax, you received £1000 of vouchers in return. You didn’t need to pay tax or National Insurance on that £1000 – saving you money.

Childcare Vouchers were phased out in October 2018, and are no longer available to new applicants. If you’re on an existing scheme you may still be able to pay with vouchers, but you’ll need to work out if the savings are better than the Tax-Free Childcare scheme, and if your childcare provider will accept them. As with Tax-Free Childcare, you can only use vouchers for Ofsted-registered childcare, including nurseries, childminders, holiday clubs and after school clubs.

Childcare vouchers are best if:

• One or more parents earns over £100K
• One or more parents doesn’t work at all
• You’re a lower earning parent (basic rate taxpayer) with childcare costs of under £9336
• You’re a higher earning parent (higher rate taxpayer) with childcare costs under £6252

Remember, you can no longer apply for Childcare Vouchers, so this is only relevant if your employer is still running the scheme.

Do childminders accept childcare vouchers?

Yes, if they choose to. Koru Kids are registered with Childcare Voucher companies so that we can accept payments from Childcare Vouchers. We then pass these funds directly on to our childminders.

Save on childcare costs with a nanny

If you’re not using a nanny right now, you might have assumed it’s out of your budget. But, a nanny can actually be a really affordable option in a few scenarios:

• If you have 2 or more young children, it can be cheaper to have a nanny than to put them both in a nursery. This is particularly true if you live in a part of London with limited childcare places and expensive nurseries. Nannies’ rates don’t differ much by location, and childminders and nurseries do. And, nannies charge by the hour regardless of the number of children, where childminders and nurseries charge per child. If your nursery costs you £15,000 per year it could cost double that for two children, so a nanny might be a cheaper choice!
• If your children are in school or have a funded nursery place, but you need care to fill the gaps (before school, after school, or during the holidays), a part-time nanny can be a really cost-effective way of maximising your working hours. Many parents don’t realise this is an option – but it can be life-changing if you choose a trusted provider like Koru Kids. Imagine getting home from work to find the school run done, children eating a freshly-prepared meal and homework all completed! You can read more about our amazing part-time nanny service here.
• Doing a ‘nanny share’ with another family generally saves about a third of the cost. The children play together, which is brilliant for them, plus the nanny earns a bit more. If you’ve only got one child, nanny share is a particularly good way to save money. If you already have a family to share with, that’s great! You can sign-up as usual and just let the nanny know it’s a share. If you need another family to share with you can use our free family-finder tool and you can chat to local families who would also like to share.

How much do nannies charge in 2021?

For a full time nanny, as a general guide, you should budget around £14-18/hour. You’ll find both cheaper and more expensive than that out there – when comparing, do make sure you always compare any alternatives to the nanny’s total costs, not just their net rate.

At Koru Kids, we keep our pricing simple. You’ll pay one hourly, all-inclusive rate, with no finder’s fees. Our nannies cost between £13.50-16.50 per hour (per family not per child) depending on their experience. If you share your nanny with another family, they will cost £9 per hour (per family).

Save on childcare costs with 15-30 hours free

All 3 and 4 year olds in England can access 570 free hours of childcare per year, from the term after your child’s 3rd birthday. This equates to 15 hours a week for 38 weeks of the year. You can choose to take fewer hours and spread the savings over more weeks if you prefer. And, some 3 and 4 year olds are eligible for an extra 15 hours, meaning a total of 30 hours free childcare a week.

Funded childcare has to meet a certain criteria:

• The childcare must be with an approved childcare provider
• The funding stops when your child starts in reception class (or reaches compulsory school age, if later)
• The funding may not cover extras like meals, nappies or outings

Am I eligible for 30 hours free childcare?

• You can usually claim the 30 free hours if you (and your partner) are working, or on leave (such as sick leave, annual leave, or parental leave)
• Self-employed work counts
• If you aren’t working you still might be eligible, if you get certain allowances from the government (e.g. disability allowance)
• You and your partner must be working at least 16 hours a week earning the national minimum wage
• Your child can only access the hours from the term after they turn 3
• If you or your partner have an expected ‘adjusted net income’ above £100,000, including any bonuses, you won’t be eligible for 30 funded hours
• Every 3 months, you have to reconfirm your eligibility

You can check your eligibility here.

Can I use the 30 free hours for a childminder?

Childminders can choose to offer funded childcare places, so you need to find a childminder who does. They don’t have to participate, and some restrict the offering to specific hours, which may or may not suit your family. Any Ofsted registered childcare provider can apply to offer funded hours, but each Local Authority has a different application process. Some childminders may find this process confusing and ultimately choose not to apply.

At Koru Kids, we encourage our Home Nursery Early Educators (our childminders) to register so they can offer funded hours. We know how important this saving can be for parents, so we provide plenty of support to our childminders to speak with their local authority and set it up.

How much does a childminder charge in 2021?

According to data from childcare.co.uk, the average hourly rates for childcare in London across all providers is £8.45. Childminder fees vary, and many charge for extras such as food or nappies (like a nursery might).

At Koru Kids we believe in simple, transparent pricing. Our Home Nurseries (childminder settings) typically cost £79 for a 10 hour day – lower than the average hourly cost of childcare in London – and our settings never have more than 3 children per adult. There is so much value in knowing your child is getting the individual attention a nursery setting cannot offer. 

What about Tax Credits for childcare?

For lower earners, there is a childcare element to the government benefit, ‘Working Tax Credits’. Figuring out your entitlement to this element can be complicated. The government takes into account your childcare costs, number of kids, the number of hours you work per week, your income, and your relationship status. It might be worth it though – the average childcare tax credit payout is over £3000 per year.

If you’re a single parent working over 16 hours per week, or a couple both working over 16 hours per week, and your household income is under £46,000, this could be an option for you. Even if that’s not you, you might still qualify. It depends how many children you have, and if they or you are disabled.

To see if you’re eligible, you can call the government’s tax credit helpline on 0345 300 3900. Ask about ‘Childcare element of Working Tax Credits’.

If you already receive Tax Credits, just remember that your tax credits will stop immediately if you successfully apply for Tax-Free Childcare.

What about Universal Credit for childcare?

Universal Credit is a payment designed to help people who need it with their living costs. You may be able to claim back up to 85% of your childcare costs if you claim Universal Credit. To be eligible, you (and your partner if they live with you) will need to either be working or have a job offer.

Each month you can claim a maximum of £646 back for one child or £1108 for 2 or more children.

If you want to find out about eligibility for Universal Credit, you can enquire here.

So, what’s the best way to save money on childcare costs?

The short answer is – it depends! But we recommend you:

• Research your eligibility for government assistance, whether that’s Tax Credits, Tax-Free Childcare, funded hours or a mixture.
• Find a trusted childcare provider with fair and honest pricing.
• Choose the right childcare to suit your needs – a part-time nanny might be just the ticket. Or, if you need full time care, perhaps you’d prefer a local childminder with an all-inclusive fee.

If you have any questions about paying your childcare fees with Koru Kids, we can answer them! Get in touch here.