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HMRC internal manual

Tax Credits Manual

From
HM Revenue & Customs
Updated
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How to calculate average weekly childcare costs

Version 3.0

Changes to previous version - amended guidance. Amendments to steps 1 to 3.

Step 1

We need the amount of childcare the customer pays and how often they pay it for, for each period to calculate their average weekly childcare costs.

Note: A period is an amount of time where the amount and frequency of the payments stay the same.

Note: Only round up to the nearest whole pound at the end of the calculation.

Note: Always confirm with the customer the number of weeks for term time or school holiday care. For how to do this follow the guidance in TCM0094080.

If the customer isn’t currently claiming childcare costs, go to .

If this is a change to existing childcare costs, go to .

If this is a claim for a fixed period of short term childcare, go to .

Step 2

Note: Normal backdating rules apply. Follow the guidance in TCM0022100.

If the customer pays the same amount each week, enter the weekly amount.

If the customer pays the childcare costs every fortnight, divide the fortnightly figure by 2 and enter that amount.

If the customer pays the childcare costs every calendar month and the childcare costs have been in continuous payment for the last 12 months

  • multiply the monthly cost by 12
  • divide the resulting amount by 52
  • enter this amount.

If the customer pays childcare costs other than weekly, monthly or fortnightly or the costs vary throughout the year

  • add the costs for the last 52 weeks together
  • divide the resulting amount by 52
  • enter this amount.

If the customer’s childcare costs haven’t been in continuous payment or have changed significantly in the last 12 months

  • add the anticipated costs for the next 52 weeks together
  • divide the resulting amount by 52
  • enter this amount.

Step 3

If the customer pays the same amount each week, the new costs have changed by £10 or more weekly and the customer expects this change to last for at least four consecutive weeks, enter the new weekly amount.

Note: The new costs must have already started or be due to start within the next seven days for this to apply.

Note: Normal backdating rules apply. Follow the guidance in TCM0022100.

If the customer’s childcare costs are variable or they pay a fixed amount other than weekly

  • add the anticipated costs for the next 52 weeks together
  • divide the resulting amount by 52
  • enter this amount if the average weekly childcare costs have changed by at least £10 weekly.

Note: Average costs should always be calculated over the next 52 weeks and not over the remaining weeks in the current year.

Note: Normal backdating rules apply. Follow the guidance in TCM0022100.

Note: Where childcare costs have decreased or ended the customer may be entitled to a four week run on period. Follow the guidance in TCM1000140.

Example

Customer normally pays £40 per week for childcare during 39 weeks term-time and £120 during the 13 weeks school holidays.

Average weekly costs were calculated as:

(13 x 120) + (39 x 40) = Annual costs of £3120, divided by 52 equals:

Average weekly costs = £60

On 30 September 2013 the customer reports that their childcare costs have reduced and during 39 weeks term-time the customer now pays £30 per week and during the 13 weeks school holidays £100 per week.

New average weekly costs are calculated as:

(13 x 100) + (39 x 30) = Annual costs of £2470, divided by 52 equals:

New average weekly costs from 26 October 2013 (to include the four week run on) = £48

Step 4

For a fixed period of short term childcare

  • take the total childcare costs the customer expects to pay for the whole of the short term period
  • divide the total by the number of childcare weeks the customer expects the childcare to cover
  • enter this amount.

Note: Short term childcare is for customers who only pay costs for short periods of the year, for example school holidays. If a customer pays childcare throughout the year but incurs additional costs for short periods, these must be added to their normal costs and averaged over the year.

Note: The tax credits computer allows the end date of a fixed period of childcare to be future posted 10 weeks in advance of today’s date for short term childcare only. This will capture most of the short term childcare claims as the majority are likely to arise from school holidays. If the fixed period end date is longer than 10 weeks from today’s date, you will need to manually end the childcare costs when they cease.

Note: The customer may prefer to have their short term childcare to be paid over a 52 week period. Where this is the case the method for calculating the average weekly cost will be as in Step 2.

Example

Customer reports they will pay £62 childcare charges on the 7, 14, 21 and 28 July 2010 and 4, 11, 18 and 25 August .

This a total of £496 in 8 childcare weeks starting Sunday 04 July 2010 and ending Saturday 28 August 2010

Average weekly costs are £496 ÷ 8 = £62