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More than a million parents miss out on money off childcare costs

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Uptake of the government’s Tax-Free Childcare scheme, which gives eligible families money off childcare costs, remains low, official figures reveal.

The latest statistics from HMRC for December 2019 show 205,000 families claim Tax-Free Childcare, up from 91,000 the same month the previous year. However, this is far lower than the 1.3 million who are eligible.

Tax-Free Childcare accounts were introduced in April 2017 for families with children aged three or under. The scheme was then rolled out to older age groups (under 12s) and became available to all eligible families from February 2018.

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. The scheme is available for those who earn less than £100,000 per year.

While take-up has been gradually increasing, many parents are still missing out on this valuable financial assistance.

Becky O’Connor, personal finance specialist at Royal London, said: “The government’s figures suggest that the majority of parents who are eligible for this extra help – which is worth up to £2,000 per child per year – are not getting it.

“The previous scheme – childcare vouchers – was administered by employers, so parents found out about the help from their workplace.

“With Tax-Free Childcare, parents are responsible for accessing and administering the top-ups themselves rather than through employers. Consequently, there is no obvious way for working parents to find out about the scheme, except through word of mouth or through their childcare provider.

“The Government could do more to incentivise childcare providers to tell parents that they can get help towards their bills through this scheme.”

The HMRC data shows the highest number of Tax-Free Childcare users is in London and the South East of England.

The age group with the highest number of used Tax-Free Childcare accounts is currently one-year olds, with a total of 69,000 in December 2019. This is followed by two-year olds with 61,000 used accounts.

Unlike the old childcare voucher scheme, Tax-Free Childcare is available to self-employed parents.

About 14% of families using Tax-Free Childcare have a self-employed parent, but this figure has been declining since April 2018. HMRC said this could be due to early take up by this group compared to employed parents who were more likely to have had access to childcare support before the scheme was rolled out.

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