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Record number of families using Tax-Free Childcare

Written by: Emma Lunn
The latest Tax-Free Childcare statistics reveal record number of families received financial support towards the cost of childcare during the 2021 to 2022 tax year.

Figures from HMRC show that 512,415 families received up to £2,000 towards the cost of their childcare during the 2021-22 tax year, up from 374,135 in the previous year.

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.

However, hundreds of thousands of families could be missing out on the help, with recent research published by HMRC estimating that about 1.3 million families could be eligible for this government support.

The latest monthly comparisons also show that a record number of families were using their Tax-Free Childcare account in March 2022 – 384,280 families compared to 282,230 in March 2021 – an increase of 102,050 families.

Myron Jobson, senior personal finance analyst at interactive investor, said: “Inflation is at a 40-year high, with energy bills, food and the price of petrol soaring, adding mounting pressure on household budgets. Many parents have to contend with an additional burden of a rising childcare bill, with nursery fees, snacks and even nappies on the up – threatening to push their finances to breaking point. For most parents, these costs take up a massive chunk of their cost of living.

“Every little helps for parents struggling to cope with the cost-of-living squeeze, and the Tax-Free Childcare scheme is a great money saver for eligible parents, effectively offering 20% off childcare up to £2,000 a year.

“Parents scrambling for ways to reduce their childcare bill amid the once in a generation type fall in living standards have most likely contributed to an uptick in usage of the scheme.

“But the uptake of the scheme continues to fall far below original estimates. Greater and more creative promotion of the initiative is needed as a large proportion of parents were unaware of its existence.”

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