Two changes from 28th June 2023 are being introduced to extend help towards childcare costs and to encourage more people to start work or increase their hours:
- The maximum amount for the Childcare Costs Element is increasing.
- Improvements are being made to the help that is available at the point when a UC claimant starts work or increases their hours.
Higher Childcare Costs Element
The Childcare Costs Element is based on 85% of the amount the claimant has paid for childcare, but up to a monthly limit. This limit is being increased by 47%.
For claimants paying for childcare for one child, it is increasing from £646 to £951 a month. For two or more children, the maximum amount is rising from £1,108 to £1,630 a month. This change will take effect from the claimant’s Monthly Assessment Period that starts on or after 28th June 2023.
Who will this help?
This change will benefit those entitled to the Childcare Costs Element (click here) whose childcare costs are more than £760 per month for one child / £1,304 per month for two or more children ie those paying childcare costs above the current limits.
Example:
Anna receives Universal Credit. She has 3 children aged 17, 15 and a baby aged 11 months. She wants to go back to work part time but the only suitable childcare she can find for the baby would cost £1000 per month. Whilst the upper limit for the Childcare Costs Element is £646, she cannot afford to do this as she cannot afford to make up the difference of £354 every month. But once the limit changes to £951, she will be entitled to a Childcare Costs Element of £850 per month (ie £85% of £1000), as the difference will drop to £150 a month.
Zara receives Universal Credit. She has two children age 8 and 2. She works full time and currently pays £900 a month in childcare costs for her youngest child. Her UC award includes a Childcare Element of £646 (because 85% of £900 is above the limit, so the limit applies. After this change Zara's UC award will include a Childcare Element of £765, so she will receive £119 a month more UC.
IMPORTANT: Watch out for those whose income is slightly too high for them to qualify for any UC currently. Once the maximum limit changes, they might be eligible for a top up of UC.
Example:
Dimitris works full-time, on a good wage. He has a 2 year old who attends day nursery, which costs £1200 per month. He gets Child Benefit but no other benefits; his earnings are too high for him to qualify for any UC (but only just!) He is using the Tax-Free Childcare Scheme (which effectively provides 20% towards his childcare costs) but he is struggling with the cost of living.
The change to the rules will benefit those whose childcare costs are more than £760 per month for one child, so as Dimitris’ costs are above this amount, he should get a benefit check – to work out if, once the upper limit for the UC Childcare Costs Element increases, he will qualify for some UC.
Dimitris’ UC Childcare Costs Element will be £951 (85% of £1200 is £1020 ie above the limit, so the limit applies). Previously, the UC calculation could only include a maximum of £646 for the Childcare Costs Element. So, he might become entitled to UC, which may give him more help than the Tax Free Childcare Scheme (it is not possible to get help through both).
Help to pay for upfront childcare costs
Who will this help?
This change will benefit those who are starting work or increasing their hours and need to pay up front for childcare in order to be able to do so.
When a UC claimant starts work or increases their hours, if they need to pay upfront for childcare, they can get help from the Flexible Support Fund. This is a grant, not a loan.
However, the problem (currently) is that they cannot then claim 85% of those childcare costs through their UC as they have been paid for through the Flexible Support Fund. So, the claimant is in the same position again - ie having to find the money to pay in advance for childcare.
The change from 28th June 2023 allows claimants to claim back up to 85% of the initial childcare costs through their UC, even where they have received funding from the Flexible Support Fund for those costs.
The change is to make it easier for the claimant to get into the Universal Credit childcare costs payment cycle.
Example
Katie claims Universal Credit. She is a single parent with one daughter, Daisy, who is 2. Katie has just been offered a part time job, 3 days pw, Monday to Wednesday, to start next Monday. There is a place available at a day nursery nearby which charges £50 per day (ie £150 pw for 3 days).
Katie cannot afford to pay up-front for the first month’s childcare. She won’t receive her first wage until the end of the month – which is 4 weeks off. Luckily, her Work Coach awards a one-off payment from the Flexible Support Fund of £600 – to pay for Daisy’s childcare for the first 4 weeks.
When Katie’s UC is assessed at the end of the assessment period, it includes a Childcare Costs Element of £510 (85% of £600). Katie can then use that towards the next month’s childcare. And so on.