Raising a Family
Our annual cost of a child survey (last published in December 2007) shows that it could cost up to £186,000 to raise a child from birth to the age of 21 and looking into the future this may be as much as £265,500 by 2012. Most significant is the cost of childcare, costing parents up to £50,538. However, there are various ways in which parents can reduce this financial burden such as the ‘Childcare Voucher' scheme.
The following information is only a summary, and should not be relied upon. It has been taken from www.hmrc.gov.uk & www.direct.gov.uk, and is correct as at 25/04/2008. For up to date information, please vist these sites, or use the contact numbers at the foot of this page.
Child Care Vouchers
Child care vouchers are one of the most effective ways of saving tax on your earnings. If your employer is signed up to a childcare voucher scheme it can help save you a significant amount of money on childcare.
Childcare vouchers can be offered in addition to your cash salary but are more commonly offered as a "salary sacrifice". This means that you sacrifice a specific amount of your salary and instead receive that amount in childcare vouchers up to a limit of £55 per week, or £243 a month. This is exempt from Tax and National Insurance Contributions (NIC), so you will only pay tax and NIC on the reduced level of your salary.
There's a useful calculator on the HM Revenue and Customs web site http://www.hmrc.gov.uk/calcs/ccin.htm which will tell you if you're better off taking the childcare vouchers. You'll also need to check how it would affect your pension contributions and any other benefits you receive.
To help pay for all your other child related expenses, parents may also be entitled to benefits and tax credits. To find out if you are eligible you can visit the HM Revenue and Customs web site or use the contact numbers at the foot of this page. The summary below explains a little about what you could be claiming:
Child Benefit
Child Benefit is a tax-free payment from the Government every 4 weeks to anyone bringing up a child or young person under the age of 16 (It is also payable for children or young people over the age of 16 who are in full time education at school or college). It is not affected by income or savings so most people who are bringing up a child or young person qualify for it.
Child Tax Credit
Child Tax Credit is a payment from the Government to support families with children. You can claim it if you, or your partner, are responsible for at least one child under the age of 16 or young person who is in full time education at school or college, who usually lives with you.
If they also live with another family for part of the time, you and that other family must decide jointly which of you has the main responsibility for that child or young person and then advise HM Revenue & Customs accordingly. Only the family with the main responsibility can claim Child Tax Credit. The amount you could get depends on various things including your income.
Working Tax Credit
Working Tax Credit is a payment from the Government to top up the earnings of low paid working people (whether employed or self-employed), including those who do not have children. To claim you usually have to be over the age of 25, and work more than 30 hours a week.
Working Tax Credit helps to make work pay for low income workers, and is paid directly to the person who is working. The 'childcare element' of Working Tax Credit is paid directly to the main carer of the child or children along with Child Tax Credit.
Useful sites and contacts:
www.hmrc.gov.uk
www.direct.gov.uk
Child Benefit Helpline – 0845 302 1444
Tax Credits helpline - 0845 300 3900