Parents of nine-month olds are now able to apply for free childcare hours in the latest rollout of government reforms.
The government announced plans last year to reform the UK childcare system, making the vast majority of working families eligible for free childcare hours.
The hours are funded by the government, which pays a contribution to providers – but it doesn't cover everything.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
This means they aren't totally free as the nursery or childminder may need to pick up the shortfall and recoup costs in other ways.
The first phase of the rollout began on 1 April this year, giving 15 hours of free childcare to the parents of two-year-olds. This has now been extended to younger children starting at a childminder or nursery from September 2024, before doubling the provision to 30 hours from September 2025.
It comes at the same time as the child benefit charge is being reformed, meaning thousands more families are now able to hold onto the perk.
The new measures represent a big win for working parents, as well as those who have been kept out of the workplace by astronomical childcare costs. However, the bad news is the policy could be jeopardised by staff shortages and limited nursery places.
We delve into what you’re entitled to and how to apply.
What free childcare support is available?
The new childcare support is being rolled out in three phases:
- April 2024: As of 1 April, eligible parents are entitled to fifteen hours of free childcare per week for two-year-olds.
- September 2024: From September, this support will be extended further to cover children aged nine months to three years.
- September 2025: The final phase of the rollout will come into effect in September 2025, when the allowance will be doubled to 30 hours for all children aged nine months to school age.
It is worth remembering that this provision is available for 38 weeks of the year during school term time, so you will need to make separate arrangements for your child during the holidays.
Eligibility criteria: Am I entitled to free childcare?
The new measures broaden the existing eligibility criteria, making free childcare available to hundreds of thousands more parents.
Previously, parents were only eligible to receive free childcare for two-year-olds if they already received some form of additional government support, such as universal credit. Under the new rules, however, parents are entitled to the support as long as they (and any partner) earn less than £100,000 each.
To apply, both parents must be in work and earning a minimum of £183 each per week. This is equivalent to 16 hours at the National Minimum or Living Wage. Further details can be found at childcarechoices.gov.uk.
Now, working parents whose children will be aged between nine and 23-months old on 31 August 2024 can apply for their government-funded childcare code via the childcare service
How much money will the free childcare policy save me?
The new policy could save working families thousands of pounds each year.
According to the National Childbirth Trust (NCT), the average cost of sending an under two to nursery part time is £138 per week (25 hours). Meanwhile, if you need full-time support, you can expect to pay significantly more. Full-time nursery fees amount to an average £263 per week (50 hours), with the costs in inner-city locations like London coming in even higher.
When you add these savings to the additional income parents will earn by returning to the workplace, the impact on a household’s wealth could be considerable.
But the government doesn't fully fund the places so any savings may be impacted by what the childminder or nursery charges the rest of the time to make up the shortfall.
There may be a minimum number of hours you need to use to qualify or there may be extra charges.
"Often parents will be charged some additional fees when claiming the free hours," says Laura Suter, director of personal finance at AJ Bell.
"The government pays nurseries a set hourly fee for the funded hours it pays for, and often this is below what nurseries would charge parents.
"While childcare providers aren’t allowed to charge explicit top-up fees, many will levy activity fees, meal charges or nappy costs to help make up the shortfall. This means the savings might not be quite as high as some parents are expecting.”
How do I apply for free childcare?
If you meet the eligibility criteria, you can apply now on the government website.
You will need your National Insurance number to hand when you apply, or your Unique Taxpayer Reference if you’re self-employed. The application form will also ask you to provide these on behalf of any partner. Finally, you will need to provide your child’s UK birth certificate reference number.
Remember, to avoid missing out, you will need to reconfirm your eligibility every three months in case your circumstances have changed.
Where can I use my free childcare allowance?
You can use your free childcare allowance with any of the following providers, as detailed on the government website:
- Full day care providers (e.g. nurseries)
- Schools
- Childminders
- Sessional providers (e.g. playgroups)
- Sure Start Children’s Centres
- After school clubs
It is worth checking with your provider before signing up to ensure they participate in the scheme.
Childcare shortages: will I be able to find a nursery place?
Critics of the government’s new childcare policy have raised concerns about the number of nursery places available.
The new policy is expected to prompt a surge in demand, as parents take advantage of the scheme and return to the workplace. Meanwhile, childcare workers report being forced out of the sector on account of low pay, as the cost of living crisis rages on.
A survey from children’s charity Coram revealed that only 27% of local authorities are “confident” or “very confident” that they will be able to meet the demand when the policy is expanded in September 2024. This falls to 12% for the September 2025 expansion, which will see the allowance double from 15 to 30 hours.
The government has taken some steps to address the shortfall, investing £200 million into the sector in funding in September 2023. It has also promised over £400 million in 2024-2025 to raise the hourly rates paid to childcare providers.
“Setting funding rates [...] much higher than current market prices should incentivise providers to sign up for the new entitlements”, says Christine Farquharson, associate director at the Institute for Fiscal Studies.
In addition to this, the government is trying to incentivise new recruits by offering a £1,000 bonus when they begin their first childcare role.
-
Will Labour change the rules on pension tax relief?Speculation is mounting that tax hikes could be announced in Rachel Reeves’s first Budget. Will pension tax relief rules be reformed?
-
NatWest shares surge after profits beat expectationsNatWest, which has been one of the FTSE 100’s best-performing stocks this year, notched up profits of £1.7bn during the quarter
