Universal credit and childcare costs - what you need to know

Published on: 
20 August 2019
Written by: 

Kirsty McKechnie

Welfare rights adviser, Early Warning System

As the school year starts again, parents will be sending their wee ones off to school or nursery and will perhaps be thinking about moving into work themselves. For many this will also involve turning to universal credit for help to pay with childcare costs. In many ways universal credit childcare costs are more generous than its predecessor in tax credits, but a new report from CPAG in Scotland’s Early Warning System suggests for some parents and childcare providers claiming universal credit childcare costs may be not be entirely straightforward.

Administrative burden for parents and childcare providers

Previously, support to pay for childcare costs was provided by working tax credits. Parents would estimate how much they would spend on childcare, report changes of more than £10 a week and confirm whether this was the correct amount at the end of the year. Childcare providers generally need do nothing more than provide parents with their childcare registration number to allow HMRC to confirm they were paying out money in respect of a genuine provider.

However in universal credit, parents must confirm, report and in some cases evidence the amount they have paid on childcare monthly, before this money can be recouped. This represents a large financial outlay for parents before it can be reimbursed and also impacts on childcare providers, who may not charge monthly at present, and force them to provide receipts. For many childcare providers, often very small businesses without a dedicated member of staff for admin, this may present a large administrative burden not posed previously.

Paying for costs up front

Parents moving into work for the first time may be able to get help with their upfront costs, such as a deposit and fees in advance, from the Flexible Support Fund, a discretionary grant available through Jobcentres.

Parents already in work can request a budgeting advance to help them with their up-front costs, but this has to be paid back from ongoing UC payments. Early Warning System evidence highlights that many people are already struggling with having to pay back loans and debts from their UC and this will only add to their financial hardship.

Errors and misleading information

DWP’s own figures show that less than 60% of UC claimants with a childcare element being paid on time and accurately.[1] Early Warning System evidence highlights parents having difficulty paying their childcare costs either because they have not been included in their UC award or because they have been underpaid, sometimes jeopardising their childcare place and consequently their work. There is also evidence of DWP staff telling people that they are not entitled to help with their childcare when they should be.

Trouble ahead

As well as gathering and analysing evidence for CPAG in Scotland’s Early Warning System, I also sit on the board of a local well run and reputable child care provider which has given me insight into how they are run. Worryingly, if it wasn’t for me bringing it up at board meetings, they would know very little about universal credit and the impact that it might have on them as a business and their service users. Because parents could claim tax credits without any input from their childcare provider, providers are often simply not aware of which of their service users receive assistance to pay for their childcare costs. They have not had to concern themselves with how the benefit system works. Help for childcare costs through universal credit is a vital source of support for low income families but presents a huge change for childcare providers. It is vital that child care providers are informed and supported to adapt to these changes so that childcare places and parent’s employment is protected.


For information see CPAG in Scotland’s Early Warning System UC and child care report