On this page

Overview

Support with childcare costs for working parents on lower incomes is available through universal credit (UC).

Universal credit and childcare costs

Universal credit (UC) can include an amount to help with registered childcare costs.

Work

There is no rule in UC about how many hours you need to work to get help with childcare costs, so any work can qualify as long as the amount of childcare costs claimed is not considered excessive in relation to your hours. For couples, both must be working unless one is a carer, or has limited capability for work, or is temporarily absent from the household. Childcare costs can continue if you are receiving statutory maternity pay, statutory paternity pay, statutory sick pay, statutory shared parental pay or maternity allowance, to allow you to maintain childcare arrangements in place when you stopped work or started to receive those benefits.

What childcare is covered

The childcare element in UC can cover approved childcare costs paid for a child for whom you are responsible, up to the 1st September after the 16th birthday. Childcare costs include:

  • an amount paid up to a month before starting work if you have been offered a job, to allow a settling in period for the child;
  • upfront fees or costs paid up to two months in advance, (but universal credit is paid in arrears, and only after the childcare has been both provided and paid for);
  • costs paid in a monthly assessment period for childcare provided in a previous month, i.e. if you are in arrears with your childcare provider (but subject to the monthly limit on amounts);
  • costs in the month after stopping work, to allow a chance to find another job without losing the childcare place.

UC cannot include amounts covered by other support, met by the employer or someone else.

How much is the childcare element

The amount covered by UC is 85% of the actual costs, up to a maximum payment of:

  • £1,031.88 a month for one child; or
  • £1,768.94 for two or more children.

UC is means-tested and therefore the amount actually paid will depend on the level of earnings and other income. 

Reporting childcare costs

You can only get an amount for childcare costs after you have paid and reported them, and childcare has been provided. Evidence of the amount paid may also be required. Childcare costs must be reported in each monthly assessment period in which they were paid, or the following monthly assessment period. A late notification may be accepted up to 13 months late with good reasons.
UC claims must be made online, and reporting of changes (including childcare costs) must usually be made online. Payment is made by one monthly payment into the claimant’s account to include money for the adult, children, housing costs and childcare costs

Budgeting advance

You can apply for a budgeting advance of UC to help pay for childcare costs (but if you are starting work or increasing hours, it is better to request a payment from the Flexible Support Fund – see below). There is no requirement to have been on UC for any length of time if you need the advance to help you start or stay in a job. The budgeting advance is discretionary, you must be earning below a certain level and the DWP must be satisfied that you can repay it. The maximum payable is £812 if you have a child. You should include childcare costs you pay in your UC claim, and can still get the childcare element to help you repay the budgeting advance.

Childcare costs and the ‘two child limit’

The two child limit may apply in UC so that a child element is not payable for a third or subsequent child born on or after 6 April 2017 (subject to some exceptions – set out in guidance on gov.uk).

The childcare element is not affected by the two-child limit. You should still report childcare costs incurred for all children, even if the basic child element is not payable.

Other help with childcare

Flexible Support Fund

If you cannot afford to pay childcare costs when you start work or increase hours, you can request help through the Jobcentre’s Flexible Support Fund, which provides discretionary help to remove barriers to work. The government has said that the fund can be used to pay 100 per cent of upfront childcare costs within the set limits for claimants on UC. This is paid directly to the childcare provider and is not repayable. You can also include these childcare costs in your UC claim, and get 85 per cent reimbursed. You cannot get the childcare element in UC for costs met or reimbursed by any other third party.

Childcare vouchers

Some employees may be receiving childcare vouchers as a salary sacrifice scheme, instead of cash pay, of up to £55 a week per employee. You only pay income tax on your earnings after the vouchers. You cannot get UC childcare element for the part of the childcare costs covered by the vouchers. You can only get help with any childcare costs still to pay once the amount of the voucher is taken off (subject to the maximum levels as explained above). This scheme is closed to new entrants.

Tax-free childcare

This scheme is for families on middle to higher incomes, as it includes those with individual earnings from £115 a week up to £100,000 a year – for couples, both must be in work unless one is entitled to contributory employment and support allowance or carer’s allowance. The government will pay £2 for every £8 the claimant pays into an online childcare account, up to a maximum of £2,000 a year per child under the age of 12 (up to £4,000 per disabled child under 17).

Claiming tax-free childcare is not a useful option if you are on a low income, because you cannot get it at the same time as universal credit. More information and a better off calculator is available on the childcare choices website.

Housing benefit and council tax reduction

You can get increased help through housing benefit (you may still be getting housing benefit if you are in temporary or supported accommodation, or are over pension age) and council tax reduction. Your childcare costs can be deducted from your earnings when calculating these benefits.

Student childcare grant

Colleges and universities may provide a childcare grant to cover your childcare costs. If you qualify for a student childcare grant and are also in paid work, you can only claim the childcare element in UC for any remaining costs that you pay yourself.

Free pre-school early education and childcare places

Local authorities are under a duty to secure a pre-school education place for all three and four-year-olds whose parents want one, and some two year olds.

Every three and four-year-old in Scotland is entitled to a minimum of 1,140 hours (about 30 hours a week during term-time) of pre-school education. Generally, entitlement begins from the start of the term following the 3rd birthday and continues until the child starts school.

This free early years provision in Scotland is also available for two year olds who are looked after, under a kinship care order or with a Parent Appointed Guardian, or in families in receipt of income-related employment and support allowance, pension credit, or universal credit (with earnings no more than £850 in the monthly assessment period before applying for the place). The childcare place continues if the qualifying benefit stops.

Not all childcare services offer funded pre-school education places. Local authorities are in charge of commissioning places and centres must be working in partnership with them. UC cannot include an amount that is covered by this free provision. If you are paying for separate or additional childcare, you can include these childcare costs.

Approved childcare

For all the help with childcare mentioned above, childcare must be provided by a Care Inspectorate registered provider, including:

  • registered childminder;
  • nursery, after-school club;
  • childcare at home by childcare agency such as a sitter service or nanny agency.

It is the claimant’s responsibility to make sure that the childcare provider is correctly registered with the Care Inspectorate. You cannot claim for childcare provided in the child’s home by the child’s parent, grandparent, aunt, uncle, brother or sister, or a partner of any of these. Childcare provided by a relative may qualify if the relative is a registered childcare provider and looks after the child somewhere other than the child’s home. In practice, the childminder must usually be looking after other children as well, to whom s/he is not related, in order to remain correctly registered.

Further information and advice

Care Inspectorate

Telephone 0845 600 9527, [email protected], careinspectorate.com.

Department for Work and Pensions Universal Credit Helpline

Telephone: 0800 328 9344 (textphone 0800 328 1344) Online information about UC on gov.uk.