How much of parent’s wages does childcare eat up in YOUR area?

Childcare costs in the east or south-east of the UK could cost up to 54 per cent of an annual salary, a study has found.

People in the south-east of England are hardest hit, with full-time childcare costs of £16,219 a year, more than half the average salary of £30,118, study finds by AJ Bell.

The figures are based on the cost of caring for a single child, and those with multiple children may find it is not financially viable for both parents to stay in work.

This is a separate report from the charity Coram which reveals nursery costs have risen by 7 per cent in just one year.

A part-time nursery place for a child under two receiving 25 hours now costs on average £158 per week, compared to just £148 in 2023, it says.

AJ Bell based his study on the cost of 50 hours of childcare per week, as well as the median weekly salary before taxes in 2023.

Meanwhile, in the east of England, parents earn on average £28,382 but face childcare costs of £15,204 a year, which also eats into their wages by 54 per cent .

After paying childcare costs, people in the South East will earn just £13,961, while those in the East of England will earn even less, at £13,177.

While the cost of childcare can be as high as £18,986 in London, the average salary of £37,705 means that nursery or childcare costs will average 50 per cent of salary.

The West Midlands and South West also topped 50 per cent, while it will cost half the average wage in the North East to look after your children.

Laura Suter, personal finance director at AJ Bell, said: “These figures reveal the financial challenge faced by many working parents, illustrating the huge percentage of wages that can be eaten up by childcare costs.

“When you factor in taxes and the cost of working, it’s clear that for many people, returning to work is simply not financially viable.

“Faced with the prospect of losing more than half of their salary to care for their children, many parents, mainly women, are not returning to work.”

The cheapest places for childcare are the East Midlands and the North West, with the East Midlands costing parents £12,626 a year and taking 47 per cent of an average salary of £26,754.

In the North West, childcare costs on average £13,271, compared to an average salary of £27,082.

In Yorkshire and the Humber and Wales, childcare costs will also cost less than half the average wage.

“If you have to interrupt your career for an extended period of time to care for your children at home, it’s important not to lose sight of the impact on your finances,” Suter said.

“You will not contribute to your workplace pension during a career break, so you should consider whether you can contribute to a personal pension or Lifetime Isa during your break. »

What help can parents get with childcare costs?

There is government assistance available to pay for childcare costs, in the form of free childcare hours and tax-exempt childcare, although Suter said it is “chronically under-demanded”.

“Tax-free childcare offers up to £2,000 per year per child off childcare costs for eligible parents, while the free hours scheme currently in place offers 30 hours to parents of three- and four-year-old children,” she added.

The free working hours scheme should be extended to 30 hours for children aged 9 months and over in September 2025.

However, free hours only apply during term time and are often not paying enough to cover the full hourly rate, meaning nurseries have to charge extra.

Parents must also ensure that they claim all the child benefit to which they are entitled.

The chancellor raised the threshold at which working parents pay high-income child benefit to £60,000 in the spring budget.

Currently, the government claws back child benefit from households with the highest income above £50,000, and cuts it off completely when they earn more than £60,000.

This will change from April, when the threshold increases to £60,000, while the threshold at which it is removed increases to £80,000.