Government urging families not to miss out on Tax-Free Childcare scheme

Latest HMRC figures show that over 405,000 families were able to save on childcare costs in December due to the Tax-Free Childcare scheme.

The government is urging those who are yet to sign up, to do so now and take advantage of the financial support for working families with children up to the age of 11, or 16 if their child has a disability.

According to recent data, December 2022 saw an increase of more than 77,500 families using the scheme compared to the previous year.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said, “We want to help families get the most out of their finances and Tax-Free Childcare can help pay towards their childcare costs.”

Currently, for every £8 paid into the Tax-Free Childcare account, families automatically receive an additional £2, with families able to save up to £500 every three months (£2,000 a year) for each child or £1,000 (£4,000 a year) if their child is disabled.

However, with the Spring Budget due next month, there have been calls for the government to increase the Tax-Free Childcare scheme in order to help keep parents in work.

The Recruitment and Employment Confederation (REC) is proposing that the government’s contribution to the scheme should be doubled to £4 for every £8 paid in. It also suggests that there should be increased funding for nurseries and childcare providers.

Kate Shoesmith, Deputy CEO of the REC, commented, “If ever there was a time when we need to get the economy moving and address the cost-of-living crisis, it is now.

“We urge government to work with labour market experts to better understand and address the causes of economic inactivity  – and we are finding the availability and cost of childcare is a significant barrier to work right now.

“One solution is for government to promote and increase the take up of the tax-free childcare scheme –  this scheme is currently used by just over 500,000 families in the UK, despite being open to over 1.2 million families. This is disappointing because tax-free childcare can make a big difference, helping with the bills for nurseries, childminders and after school clubs.

“Acting on childcare support is also vital to help the over 50s stay in work. We know that this is not just a responsibility on government, businesses have a role to play too. Employers can incentivise older workers to stay on through better job role design and flexibility.

“But without action on childcare and social care, many over 50s who have caring responsibilities for grandchildren and elderly parents, are going to continue leaving the workforce.”

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