This month’s Budget brought good news for parents, as three important changes to childcare provisions in England were announced.
The staggering cost of childcare has been much discussed in the last few years. In March 2022 the number of childcare places had barely changed since August 2015, and yet demand has been increasing. The government’s answer? A slightly bewildering mix of schemes in England.
Now we see the latest approach, which will hopefully provide some much-needed relief for parents:
- From April 2024, working parents of two-year-olds will be able to access 15 hours of free childcare a week for 38 weeks (or the equivalent of 570 hours a year).
- From September 2024, provision will be extended to working parents of children aged between nine months and two years.
- The government also plans to increase the hourly funding rate that they pay to childcare providers in England from September 2023 and again in 2024. This is to tackle the current rate’s role in shrinking number of childcare providers and increased fees paid by parents who meet their own childcare costs.
- From April 2023, the maximum amount payable under Universal Credit (UC) towards childcare costs for one child will rise to £951 a month from the previously announced £646.35. For two or more children, the maximum payment increases from £1,108.04 to £1,630 a month. UC childcare payments will be made upfront if parents move into work or want to increase their hours. Do not forget, it is possible for a couple to have total income over £60,000 and still be entitled to UC.
One aspect the Chancellor has not changed in the rule that if either parent has “adjusted net income” of more than £100,000 a year, there is no entitlement to free childcare. The Institute of Fiscal Studies has calculated that this arbitrary threshold means that someone with adjusted net income of £100,000 and two children under three years of age would need a pay increase of at least £34,500 to be better off overall because of the instant loss of free childcare beyond an income of £100,000.
Tax treatment varies according to individual circumstances and is subject to change.