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Four financial advice tips every stay-at-home parent should know

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01/05/2019
Staying at home to look after children can have a significant impact on family finances. But there are several credits and allowances parents can make use of to improve their money situation.

Every year, thousands of men and women in the UK pack in their jobs to become ‘stay-at-home mums and dads’.

In many cases, the decision for one partner to become a SAHP (‘stay-at-home parent’) is financially-motivated; their take-home pay isn’t enough to cover childminder or nursery fees.

But with one partner no longer earning, the household income is often drastically reduced and unless the working partner is on a big salary, most couples are forced to tighten their belts.

But these households can do more than cutting spending and getting thrifty. There are allowances and credits SAHPs should consider. Here are four financial advice tips:

Fill out a child benefit form even if you don’t qualify

All SAHPs should fill out the form, even if they don’t plan on claiming child benefit.

Households where one partner earns more than £60,000 can claim child benefit but must pay the entire amount back as a tax charge via a self-assessment tax return at the end of the year. Those earning between £50,000 and £60,000 have to pay some of it back this way.

But even if parents affected by this charge decide it isn’t worth it for them to receive the benefit as a result, it is important to fill out the form, because doing so means the SAHP will still receive national insurance contributions, which go towards their State Pension entitlement.

You need to make 35 years of national insurance contributions to get the full State Pension and between 10 and 35 to get a portion of it.

“Put bluntly, the cost of not filling out the form could be thousands of pounds of much-needed retirement income, as if you haven’t been working, it’s unlikely your private pension pot will deliver a big enough amount,” says Becky O’Connor, personal finance specialist at Royal London.

Continue saving into a pension

“Many people don’t realise that if you’re not earning you can still make contributions to a pension and get tax relief on them,” says Claire Walsh, personal finance director at fund group Schroders.

You can contribute up to £2,880 per year and get tax relief worth up to £720, giving you a total potential contribution of £3,600.

If your partner is a higher or additional rate tax payer, it may make more sense for them to contribute to pension as they will get more tax relief.

Don’t miss out on the marriage tax allowance

This is a tax break designed for couples where one partner is a basic-rate taxpayer and the other is a non-taxpayer (i.e. they earn less than the £12,500 personal allowance).

In eligible couples (people who are married or in a civil partnership, not unmarried), the lower earner can transfer 10% of their Personal Allowance (£1,250 in 2019/20) to their partner.

That means the partner who earns more will get £1,250 added to their Personal Allowance (the amount you can earn before having to pay tax on your income), which could save them up to £250 a year.

Claim 15 hours of childcare

All children are entitled to 570 hours of free early education or childcare a year regardless of whether their parents work or not. This is usually taken as 15 hours each week for 38 weeks per year.

If you are claiming certain benefits, you may be entitled to the 15 hours allowance when your child is two.

“You might find those extra few hours a day useful for earning a little extra or doing a course, on top of managing the budget,” says O’Connor.

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