Childcare Costs in the Capital

Childcare costs are a reality for most parents and those in London are likely to find themselves particularly hard hit. Childcare costs for under twos are approximately 25% more expensive in the capital than in the UK as a whole. A nursery place for an under two in London costs an average of £5.33 an hour, compared with £4.26 across the UK. This means that a parent buying 50 hours of childcare a week will end up paying approximately £14KPA in London as opposed to £11KPA elsewhere.

Unfortunately childcare costs for pre-school children only come down slightly as children age. Nursery cost for three and four year olds are less than 2% cheaper than those for younger children, even though legally nurseries can operate on a different staff/child ratio.

Once a child reaches school age, the impact of childcare costs is vastly reduced, but it is by no means negligible. Putting a child into an after-school club costs as average of £48.06 a week, while paying a child-minder for after-school care costs an average of £92.86 a week.

While the exact figures may be news to many people, the fact that childcare is expensive and childcare in London particularly so, is highly unlikely to come as a surprise. The question then becomes how best to cope with this expense?

It is important that you claim all the help to which you are legally entitled. Most families can claim child benefit. Families on lower incomes should check whether they are also entitled to child tax credit. This is available even to families where nobody is in paid employment. Children aged three to four are entitled to a free, early-education place for 15 hours a week. Some local authorities may offer extra help, including places for younger children.

Families where one or both parents work 16 or more hours a week may benefit from the childcare provision of working tax credit. This pays up to 70% of childcare costs from registered providers up to a maximum of £175 per week for one child or £300 per week for two or more children.

Working families may also benefit from employer-supported childcare. In theory this can be in addition to working tax credits. In practice, the two benefits tend to cancel each other out. Families who are eligible for both options should therefore consider which is best in their situation.

There are three ways employers can assist with childcare. These are: by providing childcare vouchers; by directly contracting with childcare providers and by offering on-site childcare facilities.

Childcare vouchers may be actual paper vouchers or electronic ones. You will need to check with your preferred childcare provider that they will accept these vouchers and, if so, in what form. One of the attractive features of childcare vouchers is that they can be saved up and used as needed. For example, if a family member is able to provide some help with childcare from time to time, the unused vouchers can be kept for periods such as school holidays, when childcare costs are typically higher.

If employers or parents make direct arrangements with childcare providers, these will be arranged according to each individual's situation.

This help may be offered as an employee benefit in addition to a cash salary, or it may be provided through a salary-sacrifice arrangement. Basically this means that the cost of childcare will be deducted from the employee's gross salary before it is assessed for tax and National Insurance.

Generally speaking, parents on lower incomes benefit more from working tax credits, while parents on higher incomes benefit more from employer-assisted childcare.

This article was written by Jenny, she is a freelance writer who loves writing about family issues in the UK.