The Real Cost of Childcare Across the UK
And How the Workplace Nursery Benefit Can Help
What nursery fees actually cost across the UK
Childcare costs vary significantly across the four nations. According to the ONS Annual Survey of Hours and Earnings 2024, the UK median full-time salary stands at around £37,430 gross, producing a monthly take-home pay of roughly £2,500 after tax and National Insurance.
Against that backdrop, the cost of nursery care is striking. A full-time nursery place for a child under two in England currently averages around £12,425 per year after government-funded hours are applied, or nearly £1,035 per month.
In Wales, full-time care for the same age group averages £16,256 per year, making it the most expensive nation in Great Britain for childcare. In Scotland, the annual cost of a full-time place sits at around £12,955. In Northern Ireland, the NISRA Childcare Survey 2024 found that full-time nursery with a daycare provider averages £1,054 per month, and that 48% of households consider childcare costs unaffordable.
Fees vs. take-home pay
For a parent earning the UK median wage, full-time nursery fees can consume between 40% and 65% of one person's entire take-home pay. In London, that proportion rises even further, with inner-city fees exceeding £30,000 per year in some settings.
The House of Commons Library childcare briefing confirms that over the past five years, average nursery fees have increased by around 20%, while median earnings have grown by only 10 to 15%. Childcare is becoming less affordable, not more — year on year.
Childcare costs are not a neutral burden
They fall disproportionately on women. According to the ONS Gender Pay Gap in the UK 2024, the overall gender pay gap for all employees stands at 13.1%. Critically, the gap widens sharply around the ages when parents are most likely to have young children in nursery.
Women are significantly more likely to reduce their hours or leave the workforce altogether in response to childcare costs, entrenching lower lifetime earnings and reduced pension accrual.
The DHSC Gender Pay Gap Report 2024 highlights that even in a heavily female workforce like health and social care, women remain over-represented in junior grades, with childcare pressures a recognised contributing factor.
Affordable, accessible childcare is therefore not just a family matter. It is a structural economic and equality issue.
The structural cost of unaffordable childcare
How the salary sacrifice nursery benefit changes the picture
The Workplace Nursery Benefit, underpinned by the HMRC Workplace Nursery Exemption in ITEPA 2003, allows employees to pay nursery fees from their gross salary before Income Tax and National Insurance contributions are deducted. The result is a substantial saving on the real cost of childcare.
For a basic-rate taxpayer, a salary sacrifice nursery scheme typically reduces nursery fees by around 32%. For a higher-rate taxpayer, the savings can be higher. On average, participating families save approximately £5,000 per year.
To put that in concrete terms: a parent in Scotland paying £12,955 in annual nursery fees could bring their effective cost down to under £10,650 through a salary sacrifice nursery scheme. A parent facing £16,256 in Wales could reduce their bill to around £13,460 — a saving of around £2,795 per child.
Cost-neutral for the employer, meaningful for staff
For employers, the scheme generates savings on Employer National Insurance contributions — which rose to 15% from April 2025 — and which under a compliant arrangement are passed on to the nursery. This makes the Workplace Nursery Benefit broadly cost-neutral for the employer while delivering meaningful financial relief to staff.
For NHS trusts, higher education institutions, and other public sector bodies, offering the Workplace Nursery Benefit is one of the most tangible and cost-effective ways to support working parents, close internal gender pay gaps, and reduce staff turnover.
Government-funded hours provide further relief
Government-funded hours can reduce the gross cost of childcare before the salary sacrifice saving is applied — meaning the two benefits work together to bring the effective cost down even further.
Crucially, the salary sacrifice nursery benefit can be used alongside funded hours — bringing the effective cost of nursery down even further.
A meaningful difference for working families
On typical nursery costs across the UK, accessing the salary sacrifice nursery benefit can mean the difference between a second salary that barely covers childcare and one that meaningfully contributes to household finances — and to the long-term financial security of working mothers in particular.
The financial case for families is clear. The case for employers is equally strong — and yet far too few families know the Workplace Nursery Benefit exists.
What families and employers can do
For parents considering a salary sacrifice nursery scheme, the first step is to ask their employer whether they offer the scheme. If they do not, we can help them get set up — there is no cost involved, and we make it very simple.
For employers where they already offer the scheme — particularly those in the NHS, higher education, and other public sector bodies — the Workplace Nursery Benefit is one of the most tangible and cost-effective ways to support working parents, close internal gender pay gaps, and reduce staff turnover.
Want to make childcare more affordable for your staff?
Whether you are a parent looking to save or an employer wanting to offer a meaningful benefit, our team is happy to explain everything and help you get started.
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