Tax-Free Childcare: Why are more parents not benefitting?

Recent statistics published by the Government reveal that take up of Tax-Free Childcare, a scheme to support parents with their childcare costs, which was launched in 2017, has been much lower than anticipated.

What is Tax-Free Childcare?

Tax-Free Childcare provides help with childcare costs for working parents. For every £8 a parent pays into their Tax-Free Childcare account the Government will add an extra £2, up to a maximum of £2,000 per child per year. For disabled children the maximum is £4,000 per year.

Why is the take up so low?

Government figures show that far fewer families than expected are using the Tax-Free Childcare scheme for support with their childcare costs.

The Government estimated £1.3 million people could qualify for Tax-Free Childcare, however by December 2019 only 205,000 families in the UK have used a Tax-Free Childcare account.  Only 3,240 families in Northern Ireland are using Tax-Free Childcare. While the number of families using Tax-Free Childcare has increased from last year, these figures are still considerably lower than Government projections.

There are a number of potential reasons for this, including:

  1. For some families it is not the best form of support: Many families are financially better off using another form of support, for example, remaining on Childcare Vouchers or accessing support through Universal Credit.
  2. Lack of awareness: Some families may be unaware of Tax-Free Childcare, or not aware that it could be a better form of support for them.
  3. Childcare provider does not accept Tax-Free Childcare: Not all childcare providers are registered to accept Tax-Free Childcare. We would encourage all providers to sign up to accept these payments, and can provide guidance on this process for them.

Find out the best support for you

Employers For Childcare is working to raise awareness of the range of support to assist families with childcare costs, to ensure that all parents know what support they are entitled to and can choose the form of support that is best for their family. We have produced a guide on the different forms of childcare support to help families understand the various schemes – you can download the guide from our website here.

We know this is a complex landscape, so why not let us do the hard work for you! To find out the best form of support for you and your family, please call our Family Benefits Advice Service on 0800 028 3008. Our trained advisors can help you to ensure that you are accessing all the financial support you are entitled to.