Parents logging into their Tax-Free Childcare account saw a message titled Childcare Services Account Update.

It said: “If you are one of the small number of customers unable to make payments from your account, this is because our banking partner incorrectly duplicated deposits into your account.

“We are working on this and will be in touch with the individual customers affected. There may be a delay in processing any withdrawals or payments to Childcare Providers for those affected. We have let childcare providers know about the delay.”

The latest figures show that approximately 401,000 families used Tax-Free Childcare for 478,000 children in September 2022. HMRC said about 1% of accounts have been affected by the current issue, meaning just over 4,000 families have been affected.

A government spokesperson said: “We are working to resolve this issue as quickly as possible. Customers affected do not need to call us and we will update them directly.”

HMRC said it will be manually correcting affected customers’ accounts this week and over the weekend, and that the issue should be fully resolved by 6 March at the latest.

How does tax-free childcare work?

Tax-Free Childcare provides thousands of eligible working families with financial support towards the cost of their childcare, with the government paying £240m annually in top-up payments to families using the scheme.

For every £8 paid into a Tax-Free Childcare online account, families will automatically receive an additional £2 in government top-up, and it is available for children aged up to 11, or 17 if the child has a disability.

Families receive up to £500 every three months, per child, or £1,000 if their child is disabled, helping towards the cost of before and after-school clubs, childminders and nurseries, holiday clubs and other approved childcare schemes.