Most transitions in life can have a big impact on your finances, and this is most certainly true of going back to work after having a baby. It is important that parents who are returning to work spend some time planning how to make this financial transition, and make themselves aware of the different help that is available.
Working tax credit and the childcare element
If you go back to work for at least 16 hours a week after having your child, you may be eligible for Working Tax Credit, depending on your income. Working tax credit also includes a ‘childcare element’ that you may be able to make a claim for help with up to 70 percent of the costs you incur for childcare after you have gone back to work (subject to a maximum of £175 a week for one child and £300 a week for two or more children).
Childcare vouchers
Many employers offer the opportunity to purchase childcare vouchers through salary sacrifice schemes – in effect, saving you tax on the cost of childcare. Parents should be careful, however, to check the impact of taking part in such a scheme on the childcare element of any Working Tax Credit they receive, which is assessed on cash childcare payments only.
Parental leave
As a working parent, once you have been back at work for one year you are legally allowed to take up to 13 weeks off as statutory ‘parental leave’ for each child up to the age of five. Your employer does not need to pay you for this time, but it can be a useful way of accommodating the pressures of raising a family.
The various benefits and schemes that are available to help parents returning to work are often complicated and the rules can be difficult to navigate – however you shouldn’t let this deter you from making sure you are receiving the help to which you are entitled. The most important step to take is to plan how you will make the transition in advance.
It is also advisable to find out what your employment rights are before returning to work, especially if you are returning after statutory maternity leave. If you have any questions or concerns regarding your employment rights, you can contact The Co-operative Legal Service’s advice team on 0845 602 1416. The team offers free confidential legal advice on employment issues and our legal advisors can help you understand your rights.
Q&A
1. I'm going back to work part-time next month and have been told it might not be worth claiming childcare vouchers as it will affect my tax credits. How do I work out what the best thing to do is?
You are right to check, as this is a complicated area. The problem lies in the fact that the ‘childcare element’ of Working Tax Credit, that allows recipients to claim up to 70 percent of the cost of the childcare they pay for, is assessed only on the cash value of the payments you make for the childcare in question. If you buy childcare vouchers from your employer and use these, you pay less to your childcare provider in cash and so the amount you are able to claim is reduced. In some cases, this loss outweighs the tax benefit you receive from buying the childcare vouchers. You can work out whether claiming childcare vouchers will be worth it by using HMRC’s online “better off calculator” at www.hmrc.gov.uk/calcs/ccin.htm
2. I've just returned to work after a year of maternity leave and am really struggling to make ends meet. With childcare and transport costs, my outgoings are far more than my income and I'm just getting further and further into debt every month. Help!
The first thing to do is to make your financial position clear by making a list of all the income you have coming in each month, together with all of your outgoings. Remember to include things that you spend annually, like car insurance and birthday presents, by dividing by twelve to arrive at a monthly figure. Once you have your budget in front of you, you can look to see if there is any way you can reduce unnecessary expenditure or maximise your income. As you have just returned to work after maternity leave, a key part of this will be checking that you are receiving all the benefits to which you are entitled.
If you are a customer of The Co-operative Bank and find yourself in financial difficulty, it’s important to talk to us so that we can find a way to control your debts together.
It is really important to remember that you don’t need to do any of this alone – you can always seek free advice from a debt charity such as CCCS, Citizens Advice or National Debtline. CCCS has a specialist welfare benefits advice team who are experts in benefits and their eligibility criteria, and can help you check that you are receiving everything you should be.
CCCS can be contacted via its freephone helpline, 0800 138 1111 (open Monday to Friday 8am – 8pm. You can also seek advice via CCCS Debt Remedy, an anonymous online debt counselling tool available at www.cccs.co.uk