HUNDREDS of thousands of parents are missing out on up to £2,000 a year through the government’s tax-free childcare scheme.
Around 650,000 families claimed the support last year, but many are missing out altogether or on the full amount they’re eligible for.
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The benefit was claimed for a total of 836,000 children in the last financial year, according to the latest stats by HMRC.
But on average, parents are only claiming £638 per child, far short of the £2,000 they are entitled to.
More than one million families could also be eligible for the support, meaning hundreds of thousands of families are still missing out.
It comes as the number of families claiming tax-free childcare increased by more than 137,500.
Laura Suter, head of personal finance at AJ Bell, said parents aren’t aware of the full amount they can claim, or they find the system too complicated and convoluted to use.
Meanwhile, other parents claim less than the full amount because their childcare costs aren’t high enough.
She added: “It still remains that the government is spending far less on the scheme than projected and many more families are eligible for the help but just not claiming it.”
In total, the government spent £533million on top-ups for families.
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Victoria Atkins, the financial secretary to the Treasury, said: “While thousands more working families are benefitting from tax-Free childcare, which is making a real difference to their childcare bills, many more are missing out on the help they’re entitled to.
“Parents should check their eligibility and apply online, the top-up could make a big difference to working families at a time they need it most.”
What is tax-free childcare?
Tax-free childcare is a government scheme where parents or guardians can get £2 free for every £8 put into an account.
Parents can get up to a maximum of £2,000 a year per child or £4,000 if their child is disabled.
The child has to be 11 or younger, or 16 if they are disabled.
The money has to be used to pay for childcare, including nursery, childminders, break or after school clubs.
It can be used to pay for holiday care or an out of school activity too.
As an example, if your childcare costs are £750 a month, you could pay £600 into your childcare account and the government would pay £150.
Not only are you covered each month, you’d be saving £1,800 a year per child.
It’s worth doing the maths yourself to figure out how much you should be putting into your account each month.
Who is eligible and how can I claim?
Whether you are eligible or not for tax-free childcare depends on your personal circumstances, including your income.
But, you can still get help if you are working, including if you are self-employed.
You and your partner need to be earning the equivalent of 16 hours a week at the national minimum or living wage.
But, if one of you earns over £100,000 or more a year you won’t qualify.
This does mean you can qualify for tax-free childcare if you earn £99,999 a year or less though.
Remember, you can claim tax-free childcare at the same as 30 hours of free childcare.
But you can’t claim under the scheme if you are on tax credits, Universal Credit or receiving childcare vouchers.
You can apply for the scheme online via the government’s website.
The application process should take around 20 minutes and you’ll need your National Insurance and Unique Taxpayer Reference (UTR) number to hand (if you are self-employed).
Meanwhile, the free-childcare scheme is to be extended again to parents of children aged nine months to two-years-old – find out what it means for you.
Plus, the government will start paying for childcare costs up front for those on Universal Credit.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected]
