Number claiming Tax-Free Childcare rises

The number of parents claiming Tax-Free Childcare is just over half a million, although critics says it is being used by less than half the parents who are eligible.

Child playing with toys whilst in chilcare


The number of parents who are claiming Tax-Free Childcare – a government scheme to help with childcare costs – has risen to just over half a million in the last year.

The Government says 512,415 families received Tax-Free Childcare during the 2021 to 2022 tax year, up from 374,135 in the previous year.

The scheme, which came in in 2017, has been criticised for its lack of take-up with many parents not knowing about it, not able to access it because it requires upfront payments or finding it too complicated to use.

It offers a 20% government funded top-up on money deposited into Tax-Free Childcare accounts, which can be used to pay their childcare provider, whether a holiday playscheme, a nursery, childminder or other approved provider. Accounts can be opened at any time of the year and can be used straight away, and money can be deposited at any time and used when needed.

For example, if parents and carers have school-aged children and use holiday clubs during school holidays, they could deposit money into their accounts throughout the year. Any unused money that is deposited can be simply withdrawn at any time.

The scheme is available for children aged up to 11, or 17 if the child has a disability and families can receive up to £500 every three months, per child, or £1,000 if their child is disabled.

But hundreds of thousands of families could be missing out, with recent research published by HMRC estimating that about 1.3 million families could be eligible for this government support.

HMRC also announced this week that it has issued letters to childcare providers who have not yet signed up to Tax-Free Childcare to encourage them to do so. Childcare providers can sign up for a childcare provider account via GOV.UK to receive payments from parents and carers via the scheme.

Neil Leitch, chief executive at the Early Years Alliance, said: “Although the figures show an increase in the number of families using the tax-free childcare scheme, the fact remains that the scheme continues to be used by less than half of eligible families.

“At a time when so many early years providers are struggling to remain financially viable, surely much of the money the government continues to plough into this struggling policy would be better spent increasing funding for the early entitlement offers, something our own research has shown would be the most effective way to drive down the cost of early education and childcare.

“What’s more, we have long warned that tax-free childcare is a regressive policy, with parents with more disposable income receiving more financial support than those with less. Given that we are in the midst of a cost-of-living crisis, we urge the government to start focusing on investing in policies that will actually benefit those families that need the most support.”

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