Paying for Childcare for Disabled Children

Working Tax Credit (WTC) and Universal Credit (UC):

Tax-free childcare

Childcare Vouchers:

Direct Payments (DP):

Free childcare hours

Resources

The costs of childcare for disabled children:

The Equality Act applies to childcare providers. They are not allowed to discriminate against disabled children and must make ‘reasonable adjustments’. They are allowed to charge extra if they need to employ extra staff or limit their provision to fewer children, but they are only allowed to charge for the extra costs incurred.

Working Tax Credit (WTC) and Universal Credit (UC):

Tax credits are usually only available if you are already on tax credits (child tax credit, working tax credit or both). 70% of your childcare costs up to £175 a week for one child or £300 a week for more than one child can be included in your claim for Working Tax Credit (WTC). This applies if you are a lone working parent, if both parents work, and if one parent works and the other is on benefits for sickness or disability, claiming Carer’s Allowance, in hospital or in prison. The rules on childcare costs in Working Tax Credit are here.

The rules are slightly different for Universal Credit (UC), where up to 85% of your costs can be covered, and although you must be working, there is no minimum number of hours. You should get advice before switching to UC if you are currently getting tax credits, income support, income-based jobseeker’s allowance, income-related employment and support allowance or housing benefit. You could end up worse off and you will not be able to return to your old benefits.

You can claim for disabled children up to the end of the week including 1st September following their 16th birthday. The childcare must be registered or approved. Care by a relative of the child does not qualify unless it is provided away from your home and the relative is registered or approved. As your income increases the amount of WTC or UC you get is tapered off, but for tax credits this is based on annual income (for the tax year) and for UC it is based on income in your assessment period (a calendar month).

Tax-free childcare

Tax-free childcare is a government scheme that pays 20% of childcare costs. This involves parents setting up an account to which they contribute, and the government topping it up at 20% . The government tops it up to a maximum of £4000 a year for qualifying disabled children. You won’t be able to use Tax-free childcare if you get any tax credits or Universal Credit, and applying for tax-free childcare could mean that your tax credits or UC stop. If you are in a childcare voucher scheme, you’ll be able to choose whether to continue with that or use Tax-free childcare. Voucher schemes are no longer available to new applicants.

Childcare Vouchers:

Some employers provide childcare vouchers as an extra or through a salary sacrifice scheme, although you can only get these if you are already in the scheme and you are still with the same employer, as it was closed to new entrants in 2018.  You do not pay National Insurance or tax on vouchers up to £55 a week. Vouchers can be used for registered or approved childcare. You cannot include the cost of childcare which is paid for by vouchers in your claim for WTC or UC and sacrificing some of your salary may have a knock-on effect on pay rises and pension contributions so it essential to calculate whether vouchers are advantageous in your circumstances.

Comparing different types of help with childcare costs

There is a government calculator which compares different types of childcare support here, but it does not provide details of UC entitlement and only calculates tax credits if you are eligible for the childcare element of WTC. Remember that voucher schemes are no longer available to new applicants. You can check how much you should be getting in tax credits or could get in UC using a benefits calculator.

Direct Payments (DP):

If your local authority assesses your disabled child as in need of services, such as a nursery place or short breaks (respite care), you can ask for DP (direct payments from your local council) and arrange services yourself. DP mean that you have much more flexibility.

Free childcare hours:

All three and four year olds, and all two year olds on DLA, in England are entitled to 15 hours of free nursery education for 38 weeks of the year. Some other two year olds are also eligible (eg if their family is on a low income). There are also similar schemes in Wales, Scotland and Northern Ireland.  There’s more information here.

Resources

Contact a Family  http://www.cafamily.org.uk/  helpline: 0808 808 3555

For Family Information Services – see your local authority’s website or visit the Family and Childcare Trust

Professional Association for Childcare and Early Years (PACEY) – www.pacey.org.uk


This advice applies in England, Wales and Scotland. 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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