Childcare is, after your mortgage or rent payments, one of the biggest family expenditures. For working parents, finding someone they can trust to look after young children while they work can be incredibly difficult, and very expensive. While the government has increased the availability of free childcare to parents from 15 to 30 hours a week, there are still families who either don’t qualify for free childcare, or who need more cover to be able to continue working.
So who do you turn to? Often, it’s the grandparents who take up the slack. But should you be paying your parents to look after your children, or is it just something that grandma and grandpa do for free?
Spending time with the grandkids
If babysitting the grandchildren is an occasional request, then it’s more than likely that grandparents will jump at the chance to spend some quality time with the little ones without charging. However, if you are regularly asking grandparents to look after the kids (as in several times a week), then it may get to a point where payment is discussed.
A lot of grandparents are reluctant to charge for babysitting duties, not only because of the complex family issues it can cause, but also because they are worried that any payment may impact on their state pension. However, grandparents may well be better off if they do charge for babysitting, as they could also be eligible to receive National Insurance credits to balance out any reduction in your state pension. It could be worth around £230 a year, but only a tiny minority of older carers are claiming the credits.
This government scheme, known as Specified Adult Childcare Credits, was introduced five years ago, specifically to help grandparents who took on the mantle of child carer so that parents could return to work. It wasn’t heavily publicised, and as a result thousands of grandparents are still missing out on a potentially lucrative income. If you are caring for a child under 12 then it is worth investigating whether you would be eligible for the ACC payments.
A physically demanding job
Any parent will tell you that looking after boisterous, energetic children all day is tough going. If you’re physically fit it can be hard enough, but if you’re older and less mobile then running around after a four-year-old in full meltdown mode can be almost impossible.
It also costs money to look after a child all day long, with extra food bills and entertainment costs. For older relatives already on a reduced income, even a small increase in their daily outgoings can have a big impact.
Knowing whether or not to charge your own relatives for childcare can be a contentious issue, and if handled badly can lead to family breakdowns. If that happens, and you can’t resolve the situation then it may be a good idea to bring in an outside mediator, who can offer a balanced and fair appraisal of the situation. Family law experts can give you all the information you need to come to a resolution that keeps everyone happy.
Childcare and tax
If you start charging your children for childcare services, then remember that you may have to pay tax on your income. You may also need to look at things like how earning an income (even a small one) for looking after your children could affect your home insurance policy, whether you have to register as self-employed, or if you actually breach the earnings threshold for someone drawing a pension. This can be a complicated minefield, and if you get it wrong then you could end up losing part of your pension income, or even face a tax bill.
If you’ve agreed to provide childcare for a fee then talk to a financial expert or a legal representative specialising in tax law to make sure you’re paying the right amount of tax and NI. Parents who rely on the grandparents to provide childcare and are paying them for that service, may also have to look at how it affects state income such as family tax credits and childcare allowance payments.
This is not legal advice; it is intended to provide information of general interest about current legal issues.