Kids are costly. There’s no getting around it. But there is help available – potentially thousands of pounds a year of help. From child benefit, to free and tax-free childcare. You just have to ask for it.
This article isn’t personal advice. Pension and tax rules can change and benefits depend on your circumstances. If you’re not sure if an action is right for you, ask for advice.
Child benefit
Small weekly payments add up over time. For tax year 2026/27 parents can have £27.05 per week for their first child and £17.90 per week for any additional children up until they turn 16, possibly even to 20 if they stay in approved education or training.
If you or your partner has an adjusted net income over £60,000, 1% of the benefit will be clawed back for every £200 you’re over. Once income passes £80,000 the benefit is fully lost. But this is where your pension could come to the rescue.
Paying into your pension can reduce your adjusted net income. For example, if your income for the year is £65,000, contributing £6,000 to your pension brings your adjusted net income down to £59,000, letting you keep 100% of the child benefit. For your first child that puts £1,400 a year back in your pocket but you should remember that the money you put in your pension cannot be accessed until age 55 (57 from 2028).
If you don’t need the extra cash, a nice idea can be to put some or all this money aside in a Junior ISA. Investing the full weekly child benefit could provide a nest egg of over £35,000 by the time they turn 18 provided you achieve 5% return each year. To calculate this illustration, we factored in a total of 1.25% in annual charges, but this could be lower or higher, depending on the investments you hold. We have assumed that child eligibility and benefit amounts stay the same and haven’t factored in inflation.
Even if your income means you won’t get child benefit payments, if your partner is the stay-at-home parent they should still register, as it comes with a valuable national insurance credit that counts towards their State Pension entitlement. Just remember to opt out of payments.
30 free hours of childcare
Don’t leave planning childcare until the last minute. Nursery waitlists can be long and understanding what you can afford will aid practical discussions.
Eligible parents can access up to 30 hours of free childcare a week for 38 weeks of the year for a child aged 9 months to four years. Now if either partner earns over £100,000 you lose eligibility. But again, a pension contribution could reduce your adjusted net income below £100,000 and restore your eligibility.
And if you needed further incentive, on top of reclaiming free childcare worth thousands a year and boosting your pension for your retirement, there’s another benefit.
Earnings between £100,000 - £125,140 are effectively taxed at 60% as your Personal Allowance is lost. Paying into your pension can also help you sidestep this. You just need to ensure you’re within your annual allowance, which is the lower of £60,000 or 100% of your annual eligible earnings.
Be warned you have to reapply for the free hours every three months. And if your income changes this could affect your future entitlement.
Tax-free childcare
Tax-free childcare is money that you’ve put aside to help plug the cost of any additional care needs – on top of the 30 free hours – in your working week. Think of it as a savings account that both you and the government pay into, for every £8 you pay in, the government tops it up with £2.
Those eligible can receive up to £500 per child under 11 every three months, so £2,000 is available from the government each year. The top up doubles to £1,000 every three months if your child is under 16 and disabled (up to £4,000 a year).
Same as the 30 free hours, if you or your partner has adjusted net income of £100,000 then access is lost, but your pension can help.
Your childcare provider must be signed up to the Tax-Free Childcare scheme. Before you apply, you’ll need to check with your provider that they’re already signed up.
