How to save hundreds on childcare costs

The average price of full-time childcare for a baby or toddler has hit £14,000 a year – and experts predict that fees could go much higher in the coming years. We explain how to keep a lid on rising childcare costs.

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Childcare costs are one of the biggest barriers parents face with some parents facing bills higher than their monthly mortgage or rent.

Pushchair, car seat, nursery furniture, nappies, clothes, toys… the shopping list when you become a parent seems never-ending, and can be incredibly expensive.

But the biggest cost of starting, or expanding, a family normally comes when parents return to work and need to pay for childcare.

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How much does childcare cost?

The average weekly price of 50 hours of care for a child aged under two in nursery is £269.86, according to children’s charity Coram. Over a year, this amounts to £14,033.

For parents who only need part-time childcare, the average cost for 25 hours a week is £138.70, representing a £7,212 annual bill.

The cost of childcare has risen every year since Coram started tracking prices 21 years ago. Experts warn that parents should brace themselves for a particularly big fee increase next year, due to providers’ costs rising faster than government funding.

Kwasi Kwarteng, the former chancellor, had promised to transform childcare as part of his “Growth Plan 2022” back in September, but there has been little said by the new chancellor, Jeremy Hunt, who delivers his first Autumn Statement this week.

Fed up with eye-watering childcare costs and employers failing to offer flexible working, last month thousands of parents joined the “March of the Mummies” protest demanding government reform.

While reform would be very much welcomed, there are ways to save on childcare costs – some of which many parents seem to be unaware of, potentially missing out on hundreds of pounds from the government.

We look at how much childcare costs, and offer our tips on the best ways to save.

How much is childcare?

The cost of childcare depends on how much childcare you need, the age of the child and where you live in the UK.

Childcare for those under the age of two is the most expensive – although it doesn’t get that much cheaper for three- and four-year olds – while Londoners and those in the southeast of England tend to pay the most.

Compared to a national average of £269.86 for 50 hours a week of childcare, those in the capital pay £368.73. Those in Scotland pay the least, at £212.99.

Regardless of where you live in the UK, you will still be paying one of the most expensive childcare bills in the world.

More than a third of a couple’s salary is typically spent on childcare, according to the OECD. That makes the UK the second-most expensive country for childcare in the world, after New Zealand.

Save up to £2,000 a year with tax-free childcare

One of the best ways to save on childcare costs is the government’s tax-free childcare scheme, which can give you up to £2,000 to pay for childcare (or £4,000 if your child is disabled).

Around 1.3 million families are eligible, yet only 401,000 families used it, according to the latest data from HMRC.

How does the tax-free childcare system work?

Tax-free childcare allows parents to receive up to £2,000 a year in cash from the government to help pay for childcare.

To use the scheme, families need to open a childcare account with HMRC, transfer money into it, and for every £8 paid into the account, the government adds £2. So, if you pay in £800, the government will give you £200. The annual top-up limit of £2,000 is split into a maximum of £500 a quarter.

The money can be used to pay for a range of childcare services, such as registered childminders, nurseries, nannies, after-school clubs and play schemes.

Parents of a disabled child can claim more money under the scheme, up to £4,000 a year.

To be eligible, your child must be 11 or under (or under 17 if the child is disabled) and usually live with you. Parents must be working and earning the minimum wage for 16 hours a week or more, but earning less than £100,000 a year to qualify for the scheme. The £100,000 salary cap applies to each parent, so if one parent earns £105,000 and the other parent doesn’t work, they won’t be able to use tax-free childcare.

If you qualify for the scheme – which replaced childcare vouchers, although you may be able to continue using them if you signed up before October 2018 – it could shave hundreds, if not thousands, of pounds off your childcare bill.

“The £2,000 of funding per child could pay for just over seven weeks of childcare costs for a child under two in full-time nursery – not a huge dent in the annual bill but a decent amount of help for families,” notes Laura Suter, head of personal finance at the investment platform AJ Bell.

Claim free nursery hours for three and four year olds

All children aged three and four in England are entitled to 570 hours of free childcare each year.

This is known as “15 hours free childcare” as it’s usually taken as 15 hours a week for 38 weeks of the year – but you could choose to take fewer hours over more weeks. The funding starts the term after your child turns three.

It can be used for a registered childminder, nanny, playscheme or nursery. You may have to pay for extra costs such as meals or nappies.

You can claim the 15 free hours simply by showing your childcare provider proof of your child’s age, such as their birth certificate.

Some families with children aged three or four may be able to get 30 hours of free childcare a week. Both parents (or just one, if it’s a single-parent household) – must be in work, on sick leave or annual leave, or on shared parental, maternity, paternity or adoption leave.

There are two earning requirements:

  • Parents must earn a wage equivalent to 16 hours a week at the national minimum or living wage
  • Parents must not earn more than £100,000 a year (on an “adjusted net income” basis)

If you’re self-employed and started your business less than a year ago, you can earn less and still be eligible for 30 hours of free childcare.

Parents must re-submit their financial status every three months to tell the government they still qualify. Find out more, and apply, at

Note that you can claim the free hours while also benefiting from tax-free childcare.

What about Scotland, Wales and Northern Ireland?

There are similar free childcare schemes in Scotland, Wales and Northern Ireland. In Scotland, you can get up to 1,140 hours of funded early learning and childcare a year if your child is three or four years old. This is around 30 hours a week in term time.

In Wales, parents can get up to 30 hours a week of early education and childcare for children aged three and four.

In Northern Ireland, three and four year olds are entitled to at least 12.5 hours a week of funded childcare, or 475 hours a year.

Get extra help if you’re on a low income

There is extra help available to families on a low income. In England, parents who are on certain benefits may be able to claim free childcare for children from the age of two for 15 hours a week, for 38 weeks a year.

The “free childcare for two-year-olds” scheme is available to those who receive income support, income-based jobseeker’s allowance, income-related employment and support allowance, Universal Credit, tax credits or the guaranteed element of state pension credit.

You may also be able to claim extra benefits – either tax credit or Universal Credit – that could help you with childcare costs.

To qualify for Working Tax Credit, you and your partner – if you have one – must work at least 16 hours a week. You can receive up to 70% of what you pay for childcare, up to a maximum of £175 per week for one child, or £300 for two or more children.

If you're already on Universal Credit, you can't apply for tax credit, and so the childcare element will be included within your overall payment. You can claim back up to 85% of your childcare fees, up to a maximum of £646 a month for one child, or £1,108 for two or more children.

Rebekah Jackson Reece of the Out of School Alliance urges families to access the available support, “whether that’s setting up a tax-free childcare account and benefiting from government contributions, or maximising working tax credits or the childcare element of Universal Credit”.

This will help them make much-needed savings during the cost of living crisis, and could mean their child can continue to go to nursery, or, say, an after-school club, “allowing children to play, socialise, try new things, and just be kids”.

Try nanny sharing – or parent sharing

If you don’t need full-time childcare, a nanny share could be a cost-effective solution. You can share a nanny with a friend or neighbour, saving you money and adding a sociable element for the children.

If you don’t know anyone to share a nanny with, you can use websites such as and to find someone in your local area that would like to be part of a nanny share arrangement. You can also check on local community groups such as Facebook to find nannies and/or families that may be interested.

An alternative option is to share a parent to look after the kids. Families could take it in turns to look after the children for a number of hours, or a whole day.

For example if you work Monday to Wednesday, you could offer to look after a friend’s child on Thursdays (along with your own child), while on Wednesdays your friend looks after your child. This means you’d save paying for childcare on Wednesdays, and have Fridays to yourself to spend with your child.

Au pairs, where a person from abroad comes to stay with a family, can be a cheaper option than nannies. Find out more, and check the rules around hiring an au pair, on

Ask grandparents for help

If family members with spare time live nearby, such as grandparents, consider asking them to help. You could really reduce your childcare bill, and also allow your child and their relative to spend valuable time together.

They could look after a baby or toddler while you work, or help with the school or nursery pick-up.

Grandparents providing childcare for grandchildren under the age of 12 may qualify for National Insurance credits, which could give their state pension a boost.

Don’t forget Child Benefit

Child Benefit is paid to parents and guardians to help with the cost of raising children. The rates are currently £21.80 a week for an eldest child or only child, and £14.45 a week for subsequent children.

If you or your partner earns more than £50,000 a year, you may have to pay some of the benefit back via a tax return, known as the High Income Child Benefit Charge. If one parent earns above £60,000, then you will pay a charge that is equal to the High Income Child Benefit Charge.

The complexity around the High Income Child Benefit Charge means some people do not apply for Child Benefit, however, you should still register for it as it will protect your National Insurance contributions, which then count towards your state pension. These National Insurance credits can be passed to grandparents if they are not working and take on childcare duties.

Ruth Emery
Contributing editor

Ruth is passionate about helping people feel more confident about their finances. She was previously editor of Times Money Mentor, and prior to that was deputy Money editor at The Sunday Times. 

A multi-award winning journalist, Ruth started her career on a pensions magazine at the FT Group, and has also worked at Money Observer and Money Advice Service. 

Outside of work, she is a mum to two young children, a magistrate and an NHS volunteer.