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Childcare Costs and Universal Credit

Last updated: 29 Jun 2021

How coronavirus affects childcare costs and Universal Credit: If you qualify for UC and are eligible for the childcare element, government guidance confirms you can claim your childcare costs as usual provided that you are able to access the childcare and it actually takes place. Your childcare costs will be included in the calculation of your maximum UC in the usual way.

Report the amounts you have paid for childcare to the DWP via your online UC account, if you have one, or by telephone.

The childcare element of Universal Credit

Universal Credit (UC) is a benefit for people on a low income. It has replaced Working Tax Credits, Child Tax Credit, Housing Benefit, Income Support, income-related Employment Support Allowance and income-based Jobseekers Allowance. If you are on one of these benefits you should get further advice as claiming Universal Credit could make you worse off.
UC can be claimed by people in lots of different situations and it can include elements for children, childcare and rent. There is no set amount of UC that you will get as it all depends on your financial and family situation.

You may be entitled to help with childcare costs in your Universal Credit. First of all, check whether you meet the conditions for Universal Credit. There are separate conditions for the childcare element.
The rules for the childcare element of Universal Credit are:
The childcare element can be included for a child up to 31 August after their 16th birthday.

  • The childcare must be registered or approved and not provided by a close relative if it is being given in your own home. Most school-based childcare is also covered. The rules on what childcare counts are slightly different in England, Scotland, Wales and Northern Ireland – get advice if you are not sure.
  • You must be in paid work to get help with childcare costs. There is no minimum number of hours you need to work to get help with childcare costs, however, the childcare must be provided in order to enable you to work.
  • If you are claiming with a partner both of you normally need to be in paid work, unless one partner is on certain benefits or national insurance credits for sickness or disability (for example, getting Employment and Support Allowance), in hospital, in prison, or a carer entitled to Carer’s Allowance
  • The maximum childcare costs taken into account (for 2021/2022) are £646.35 a month for one child or £1108.04 a month for more than one child.
  • The maximum award is 85% of what you pay or 85% of the maximum childcare costs, whichever is lower. However, you may get less than this because UC is reduced by your income.

You can use a benefits calculator on gov.uk to help you work out whether you are entitled to Universal Credit. You should find out how much childcare would cost in your area for any childcare that you would like to use and include this in the calculation to get an accurate result.

Working out your childcare costs

Working out your eligible childcare costs for Universal Credit can be quite complicated and 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 relevant 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.

How is the childcare element of Universal Credit paid?

Help with childcare costs is paid in arrears on Universal Credit. This means 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 for childcare 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.

What if I am starting a new job?

If you are looking for work on Universal Credit and start a new job, you may be able to 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.

Universal Credit childcare element and the two child limit

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.

What about free childcare and other help with childcare costs?

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, but 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.

This advice applies in England, Wales, Scotland and Northern Ireland. If you live in another part of the UK, the law may differ. Please call our helpline for more details.

If you have further questions and would like to contact our advice team please use our advice contact form below or call us.

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The information on the law contained on this site is provided free of charge and does not, and is not intended to, amount to legal advice to any person on a specific case or matter. If you are not a solicitor, you are advised to obtain specific legal advice about your case or matter and not to rely solely on this information. Law and guidance is changing regularly in this area.