If you are responsible for a child and live in the UK, you will get a payment for each child you have regardless of your income. You may have to pay a tax charge if you or your partner’s individual income is over £50,000.
Parents on a low income
Tax credits are income-based state benefits that provide extra money to anyone responsible for children. There are two tax credits; you may be entitled to one or both of these.
Note: you can’t claim tax credits and Universal Credit at the same time.
- Take a short questionnaire to find out if you qualify.
- Use the tax credits calculator to see how much you could get.
Child Tax Credit
If you have a child under 16, you could claim Child Tax Credit. This won’t affect your Child Benefit. You can make a claim if you don’t live in a Universal Credit area or you have three children or more. Otherwise, you’ll need to apply for Universal Credit instead.
Working Tax Credit
If you’re aged 16 to 24 and have a child or a qualifying disability you could be eligible for Working Tax Credit. You must usually work a certain number of hours a week, earn an income and that must be below a certain level.
If you can't work because you're ill you may still be treated as working and be able to get WTC. This will depend on the length of time you're off work and what your usual working hours were before you went on sick leave.
Your partner can also claim if they work at least 16 hours a week and are entitled to Carer’s Allowance, or you are receiving certain benefits due to your disability or health condition, or are in hospital.
Changes to tax credits
It’s important to report any changes to your circumstances to the Tax Credit Office within 30 days or you risk being fined. Check which changes you must report.
Child Tax Credit is now limited to two children for children born from April 2017. Tax credits will be frozen for four years from 2016-2017. People starting a family after April 2017 will also no longer be eligible for the Family Element in tax credits. The equivalent in Universal Credit, known as the first child premium, has also been scrapped.
To claim tax credits, call the Tax Credit Helpline on 0345 300 3900 and ask them for an application form or find out more on gov.uk.
Some benefits are being replaced by Universal Credit. This is a single monthly payment made up of a basic standard allowance, with more money on top of this if you’re eligible for extra elements – such as if you have a health condition that stops you working.
However, UC has been reduced in the same way as Child Tax Credit whereby it’s limited to two children.
Parents who are working
This is an employee benefit that could save you around £1,000 a year in childcare expenses, as childcare vouchers are free from tax and National Insurance contributions.
You could get up to £55 a week from vouchers, depending on how much you earn. The money will normally be taken out of your salary each month and will go directly to your registered childcare provider through an electronic payment scheme.
Childcare vouchers can affect the tax credits you receive. Find out if you will be better off taking childcare vouchers or not by using the Childcare vouchers: better off calculator.
Speak to your Human Resources department and find out if they run the scheme and who you need to contact (there are a number of companies that distribute the vouchers).
If you are on sick or unpaid leave, your salary will continue to be adjusted by the value of your childcare vouchers. If your sick pay runs out or you are taking unpaid leave, you will not be able to remain in the scheme. You also cannot take childcare vouchers if it reduces your sick pay below the statutory rate.
Tax-free Childcare (TFC) scheme
TFC is a Government-backed voucher scheme which will eventually replace current childcare vouchers. It is currently being rolled out and will offer eligible families a 20 per cent tax break on the first £10,000 of childcare costs for children under 12. This will provide savings of up to £2,000 per child each year.
The new scheme will only be open to some working parents – those who are both working or single parents. They must also be working a minimum of 16 hours per week and not be receiving tax credits.
Parents can continue to sign up for the current childcare vouchers through their employers until April 2018 and may be able to continue for as long as their employer runs the scheme.
Time off (parental leave)
Every parent is legally entitled to take up to 18 weeks’ unpaid leave for each child until their 18th birthday. During this time, your employment rights will be protected.
There are restrictions on how much parental leave you can take in a year, and how you can take it. You can find out more about this at gov.uk.
It's worth speaking to your employer to see if you can arrange extra leave – they don't have to pay you, but it may be that they do as part of your contract.
Shared Parental Leave and Pay
Employed parents may be able to get SPL and Statutory Shared Parental Pay. If you are eligible to receive SPL, you can take it in up to three separate blocks and decide how much time you will take along with your partner.
If you have a child aged under six or a child who has a disability and is under 18, you have a legal right to ask your employer to negotiate a working pattern that helps you care for your child. This could be especially important if you are continuing to work while having treatment.
They don't have to fulfil this request, but they do have to consider it seriously. You need to have worked for your employer for at least 26 weeks when you make your application, and you can only make one application a year.
All children aged three to four in England are entitled to 15 hours of free early education or childcare a week, for 38 weeks of the year. Some two-year-olds are also eligible. This has to be spread over at least three days and is limited to term-time only.
From September 2017 you may be able to get 30 hours a week.
Contact your local council to find out what Sure Start Children Centres are in your area and what free classes and playgroups are available.
Alternative childcare arrangements
If you're struggling to keep up with payments, it could be worth looking at finding an alternative childcare arrangement that will save you money – even if it's only temporary.
Deciding if one form of childcare is cheaper than the other will depend on various factors, such as how many children you have, if you're paying by the hour or day, and how flexible your childcare provider is when it comes to payments.
It's times like this where accepting help from friends and family could save you a lot of money and stress when it comes to childcare and travel. By reducing nursery fees by just one day a week, you may be surprised by how much you will save on a monthly basis. You could also organise to share lifts to and from school to save on fuel costs.
- If you are a parent who is studying, see if you’re entitled to more financial support
- Read more about budgeting, cutting down spending, borrowing safely and dealing with debt
Updated August 2016, next review due 2017.