Guide to Universal Credit Childcare Funding

Childcare costs can feel overwhelming – but support is available. Alongside funded childcare hours and tax-free childcare, some families may be better off claiming support through Universal Credit childcare funding. For some families, it might be the case that claiming support with childcare costs through Universal Credit is actually the best option, as it can potentially cover up to 85% of childcare costs, if you are eligible.

In this guide, we explain how the childcare element of Universal Credit works, who’s eligible, how much you can claim, and how you can use it at your local Kids Planet nursery. 

What is the childcare element of Universal Credit?

Universal Credit (UC) is a UK government benefit to support those on a low income. Since it was first introduced in 2013, it has gradually been replacing older benefits such as Working Tax Credit, Child Tax Credit, Housing Benefit, Income Support and some other income-based benefits. 

One part of Universal Credit – the childcare element – is specifically designed to help working parents cover childcare costs so they can continue working or take on more hours.

You must be using a registered childcare provider to be eligible, such as an Ofsted-registered nursery, childminder, or wraparound care provider. All Kids Planet nurseries are registered providers.

How much does Universal Credit pay towards childcare costs?

If you’re eligible, Universal Credit can cover up to 85% of your childcare costs, up to:

• £1,014.63 per month for one child
• £1,739.37 per month for two or more children

If your child has a disability, you may be able to claim additional support. 

Who is eligible to claim Universal Credit childcare costs?

In order to be eligible for the childcare element of Universal Credit, you must already: 

• Live in the UK
• Be over 18 (but under State Pension age)
• Be in paid work, or about to start work
• Have less than £16,000 in savings (alone or combined with a partner)
• If you live with a partner, you must both be working unless one of you has caring responsibilities or cannot work due to illness or disability.

You may be eligible if you:

• Are on sick leave and are receiving Statutory Sick Pay
• Are on maternity, paternity or adoption leave (if you are receiving Statutory Maternity Pay, Statutory Paternity Pay, Statutory Shared Parental Pay, Statutory Adoption Pay, Maternity Allowance)

The childcare that you use will need to be from a registered provider in order for Universal Credit to pay towards the costs. This usually means that they are registered with OFSTED in England or the Care Inspectorate Wales. This includes day nurseries, childminders, some after-school clubs or wraparound services and other registered settings. 

How do Universal Credit pay childcare costs?

The childcare element of Universal Credit is designed to pay ‘reasonable’ costs that help the parent work or get into work if not already working. This means that as well as covering the actual hours the parent is working, it could also contribute towards:

• Settling-in sessions before you start a new job, to help your child get used to the childcare setting. 
• Childcare needed while you travel to your job
• Childcare in the month after employment ends, to help you get back into work quickly or transition into a new role
• Childcare if parents have unpredictable working patterns or are on zero-hours contracts

Depending on your circumstances, you may be able to get help with upfront childcare costs through Universal Credit. 

In most cases, Universal Credit usually requires you to pay your childcare costs upfront and then claim them back. 

Also, it’s important to report childcare costs to Universal Credit as soon as you’ve paid them so that you don’t miss out on getting a refund. 

Is there a two-child limit for Universal Credit childcare costs?

There isn’t a two-child limit as such. You can claim support for more than two children. However, the maximum amount you can receive is capped at £1,739.37 per month for two or more children, so you will not receive more than this regardless of how many children you have in childcare..

There are some exceptions to this limit, including if any of your children are disabled, you may be eligible for additional payments.

Can you combine Universal Credit childcare funding with other schemes?

You are not able to claim tax-free childcare and the Universal Credit childcare element at the same time, but you can use your Universal Credit with the government funded hours scheme. 

That means:

• From September 2025, working parents of children aged 9 months to 4 years can claim up to 30 hours of funded childcare during term time.
• Until then, children aged:
  • 3 to 4 can get 30 hours
  • 9 months to 2 can get 15 hours

You can claim Universal Credit to help cover any extra hours or wraparound care costs not covered by the funded hours.

👉 Learn more about funded childcare hours.

How does claiming Universal Credit childcare costs work with Kids Planet Nurseries?

Using Universal Credit childcare funding at Kids Planet is simple. Once you’ve secured a nursery place, just:

1. Apply for your funded hours online (if eligible)
2. Report your childcare payments each month via your Universal Credit online account
3. Receive up to 85% of your costs refunded through your Universal Credit payments

If you have any questions or want to arrange a show round, just get in touch with your local Kids Planet Nursery Manager – we’re here to help every step of the way.

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