Around two million households are to benefit from the Tax-Free Childcare scheme, helping families receive £2,000 a year towards the cost of childcare for each child under the age of 12 (or under 17 for disabled children).

It officially launched in April this year and the government’s flagship scheme was due to be rolled out gradually over the course of 2017, with parents of the youngest children able to apply first.

But the government’s announced that all eligible parents will be able to apply by the end of March 2018, delaying the full roll out by three months. From 24 November, parents whose youngest child is aged six or under will be able to apply.

Technical issues

Over the summer, parents struggled to complete application forms for both the Tax-Free Childcare scheme and the government’s scheme to double free childcare to 30 hours a week. They reported the HMRC systems not recognising applications from parents on maternity/paternity leave, or from those in receipt of carers’ allowance.

Others reported significant delays with their eligibility code, meaning they could not pass them over to childcare providers in time. And for some, they weren’t informed whether they were eligible for the scheme for 20 days.

As a result, HMRC launched a compensation scheme to help affected families.

It is understood these technical issues have delayed the roll-out programme but HMRC said it’s made “significant improvements” since the summer to manage the volume of applications. Parents will receive a prompt eligibility response when they apply with almost all parents receiving a response within five working days. It added that most will get their decision instantly.

Tax-Free Childcare Scheme

Parents can open an online account via the Childcare Choices website, which they can pay into to cover the cost of childcare with a registered provider. So far, 275,000 parents have an open account.

For every 80p they or someone else pays in, the government will top up an extra 20p up to a maximum of £10,000 a year. So that could mean the equivalent of up to £2,000 worth of support per child per year (or £4,000 for a disabled child).

The scheme is available to all working parents, including the self-employed.

To be eligible, parents have to be in full or part-time work, with each earning on average at least £120 a week and not more than £100,000 each a year. The parents can have a combined income of over £100,000.

Parents and anyone else (for example grandparents or employers) can pay money into their childcare account when they like – they can pay in more in some months than others.

See YourMoney.com’s Tax-Free Childcare guide for more information, including details of the Childcare Voucher scheme.