One million families missing out on £2,000 worth of free childcare every year

More than a million families in England could be missing out on thousands of pounds worth of support because confusion over the Government's tax-free childcare scheme.

New HMRC figures show 1.1million families are missing out on the £2,000 a year benefit because they're unaware of how the scheme works.

The tax body said that around 90% of people who are eligible for tax-free childcare haven't used it.

This is partly because the system is "too complicated" and partly because people assume they are not eligible.

According to insurer Royal London, the average annual cost of childcare is £12,789. Getting the full government tax-free contribution could pay 16% of this bill.

Becky O’Connor, finance expert at Royal London, said: "The government needs to do more to boost awareness and understanding of the benefits of this scheme, which can save parents thousands of pounds.

"So far, the scheme has failed to reach the majority of those it was intended to help and working parents are missing out."

What is Tax Free Childcare?

Tax Free Childcare is a government scheme designed to support working parents with their childcare expenses.

To use it, you simply apply to open an account online. If successful, you'll be asked to open an NS&I account which you can then pay cash into to pay your childcare provider (providing they're registered with Childcare Choices). 

For every £8 that you pay in, the Government will make a top-up of an additional £2. This is up to a maximum of £2,000 per child a year (or £4,000 for disabled children).

The scheme is open to working parents, including the self-employed, who earn between the minimum wage and £100,000 a year and have children aged 0-11 years old (or 17 if the child has a disability).

The money can then be put towards a whole range of other childcare options, including before and after school care when term time starts again in September.

Once registered, you'll need to sign back in every three months to confirm your details are up-to-date.

You can find out more and apply through the Childcare Choices website.

You’ll need your details (and, if relevant, your partner’s), including your national insurance number and unique taxpayer reference (UTR), if you’re self-employed, to hand.

It takes 20 minutes to apply and you'll find out if you qualify within seven days.

To qualify, parents will have to be in work, and each earning at least £115 a week and not more than £100,000 each year.

It is only available to families in England. But, unlike Childcare Vouchers, is also available to the self-employed.

While both parents must be working to qualify, those temporarily absent from the workplace such as those on paid or unpaid maternity, paternity or adoption can still claim.

What about 30 Hours Free Childcare?

30 hours free childcare is another scheme designed to support working parents – it launched in September 2017.

The scheme allows all working parents in England to claim an extra 15 hours a week in care for free.

To apply for any of the above, parents must both be working and each earning at least £120 a week (on average) and not more than £100,000 each a year.

You can find out more about tax free childcare, here and 30 hours free childcare, here.

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