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Just one in six eligible families takes up tax-free childcare offer

By Rachel Lawlerfamily tax free childcare

Eligible families are not accessing the government’s tax-free childcare offer because they have not heard of the scheme, according to research commissioned by HMRC.

The latest statistics from HMRC show that just one in six eligible families are using a tax-free childcare account, with just 204,950 families accessing the offer - compared to the 1.3 million estimated to be eligible for the offer.

Confusion around offer
Many of the eligible parents surveyed as part of the research into low take-up of the offer said that they were not aware of the offer before the survey. Some parents also had issues understanding how the scheme worked and how it differs to other funded childcare schemes.

Some eligible parents also told the researchers that they were using childcare vouchers or the 30-hours scheme instead and did not need to use tax-free childcare.

The researchers also found that some eligible parents felt that the scheme was not generous enough and that was why they hadn’t signed up.

A “small minority” of parents had not signed up as a result of “technical difficulties” during the application process.

Lower than expected take-up
One parent told the researchers: “Nothing like this is simple when it comes to applying for it. Things like this usually take forever and if you got it, would it be worth it? If it means I end up saving £10 a month, it’s not life changing is it?”

Another said: “I think the amount of effort it took to do the 30 free hours kind of put me off […]. The hoops I would have had to jump through, for the limited amount that I would have needed it, it meant I didn’t bother to apply.”

In March 2019, just 125,000 families had signed up to the scheme – meaning that more than a million eligible families are not taking up the offer.

"Regressive policy"
Neil Leitch, chief executive of the Alliance, said: Tax-free childcare has been a flawed policy from the very beginning. At its core, it’s completely regressive, as the more money a parent can afford to save towards childcare, the more support they receive from government. Add to this the seemingly endless technical glitches the scheme has suffered since its inception, and now the fact that less than one in six eligible families are actually using a tax-free childcare account, and it’s clear that the government needs a complete rethink of its childcare policy priorities. 

“At a time when the so-called ‘free’ childcare offers are crying out for increased funding, it beggars belief that the government is continuing to plough money into a scheme that is reporting continually low levels of take-up, and that offers minimal benefit to the families that need the most support. 

“As such, we urge the government to undertake an urgent review of this policy, and seriously consider whether this is money that would be better spent elsewhere.” 

Find out more
Read the research report in full
£600m tax-free childcare underspend will return to the Treasury
Read the latest HMRC statistics