Universal credit childcare funding set to rise 47% from June

Parents on universal credit will be able to claim hundreds of pounds more to cover childcare costs from the end of June, the government has announced.

Under the new policy, which was announced as part of the 2023 budget, parents on universal credit can claim back £951 for childcare costs for one and £1,630 for two or more children – an increase of 47%.

Previously, the amount parents on universal credit could claim had been frozen at £636 a month per child for several years. Meanwhile, the cost of childcare has increased by 44% since 2010.

Currently, people in England who are eligible for support must pay their childcare costs upfront and then claim a refund.

However, the policy also provides upfront childcare funding to support eligible parents with their first month of childcare costs when they either enter work or increase their hours.

Those parents will receive up to 85% of their childcare costs back before their next month’s bills are due.

The Department for Education has also launched a consultation aimed at increasing the early years’ workforce in England to ensure there’s enough capacity for parents wanting to work.

In the budget, Chancellor Jeremy Hunt also extended the current scheme offering some families 30 free hours of childcare a week to support younger children.

The changes will be phased in for households in England where the parent or parents earn at least £152 a week but less than £100,000 a year.

The cost of childcare in the UK is among the most expensive in the world, according to the Organisation for Economic Cooperation and Development (OECD).

For a couple with two young children, childcare costs take up nearly 30% of their income. And the average annual price for full-time nursery childcare in England for a child under two was more than £14,000 in 2022, according to children's charity Coram.