Childcare Costs and Universal Credit

Working out your eligible childcare costs for Universal Credit can be complicated. You are entitled to ask for an explanation if you don’t understand your Universal Credit payment statement.

The childcare element is added to the other elements of Universal Credit you are entitled to, to give your maximum Universal Credit entitlement. The DWP will then make deductions for your earnings and any other income you have, so the amount of help you get with childcare costs may be less than mentioned above.

To qualify for help with childcare costs on Universal Credit you must be in paid work (this includes self-employment) or have an offer of paid work that is due to start before the end of your next monthly assessment period. In addition, the childcare must be with a registered childcare provider, the childcare must be provided to enable you to do paid work, and you must report the costs no later than the end of the assessment period after the one in which the childcare costs were paid.

Help with childcare costs is usually paid in arrears on Universal Credit. However, if you are taking up paid work or have increased your hours at work you can get help with your childcare costs upfront. If you are not taking up paid work or increasing your hours you usually have to pay the costs yourself and then report what you have paid through your online Universal Credit account each month. Universal Credit will reimburse you by paying you some of that money back. You are usually only reimbursed costs for childcare that has taken place within that assessment period or the previous assessment period.

For example: Simone’s assessment period on Universal Credit runs from the 13th of each month and ends on the 12th of the following month. She has childcare costs of £400 a month which she pays on the 1st each month. For the amount she paid on 1st May to be included as childcare costs, she must report it to UC before 12th June. I.e. she paid the costs in the assessment period 13th April to 12th May so must either report the costs within that assessment period, or by the end of the following assessment period (13th May to 12th June) in order for them to be included.

If you pay more than one month’s childcare costs in an assessment period (for example you pay a full term up front) you will only be reimbursed for childcare costs that have actually taken place within that assessment period. The rest of your childcare costs will be paid in later months, once the childcare has taken place. These payments can be split over a maximum of 3 assessment periods.

If you are on Universal Credit, looking for work and start a new job or increase your hours, you can get help through the flexible support fund with up-front childcare costs including deposits, retainers and the costs of taster sessions. You can get this for the period between starting work and receiving your first wage and you will not have to pay the money back.

You should ask your work coach at the Jobcentre about the flexible support fund. If you cannot get help through the flexible support fund you may be able to get help with upfront childcare costs through a budgeting advance instead.

The two child limit does not apply to the childcare element of Universal Credit.

This means that you can receive payments to cover the childcare costs for any number of children, but the maximum amount of help doesn’t change if you have two children in childcare or more than two.

You can get 15/30 hours free childcare at the same time as claiming Universal Credit. If you pay for additional childcare on top of the free hours you can claim the childcare element of Universal Credit to help with the additional costs.

It’s also a good idea to bear in mind other sources of help you might be able to use. If you are already signed up to childcare vouchers (this scheme has closed to new applicants since October 2018) you can use these at the same time as Universal Credit. Most people can save more money using the Universal Credit childcare element alone.

Another childcare scheme is tax-free childcare, but you won’t be able to use this if you claim Universal Credit or you are in a salary sacrifice scheme for vouchers. You can find out more about all the schemes from the Childcare Choices website, and there is a tool to help you work out how much help you would get from each scheme you are eligible for here.