Government figures show parents are still not taking up tax-free childcare offer

Olivia Rook
Wednesday, August 21, 2019

Only 160,000 families are making use of the troublesome scheme, which was launched almost two years ago and received over 1,000 complaints in 2018.

Parents and providers have encountered a number of issues with the tax-free childcare service
Parents and providers have encountered a number of issues with the tax-free childcare service

Only a third of the number of families initially expected to benefit from tax-free childcare have opted-in to the scheme, according to statistics released by HMRC today.

The Government offer, which was launched in September 2017, has been taken up by 160,000 of the 415,000 families originally forecast to use the system.

If parents are eligible for the scheme, the Government will pay £2 for every £8 they pay their childcare provider. This means parents can receive up to £500 every three months for each of their children.

Neil Leitch, chief executive of the Early Years Alliance, said: ‘We warned tax-free childcare was a regressive policy from the outset because it meant parents with more disposable income received more financial support from Government than those with less.

‘The worryingly low take up of tax-free childcare seems to show these fears have now been realised.’

The statistics show the South East accounted for the largest proportion of families using a tax-free childcare account to pay their provider (16.9 per cent), followed by London (13.9 per cent).

Wales, Scotland, Northern Ireland and the North East of England had the lowest percentages in terms of account usage. These low numbers are likely to be caused by the link between tax-free childcare and 30-hour free childcare accounts, the latter only being available in England.

A system plagued by technical issues

The statistics have been released amid further concerns relating to technical issues with the payment system. Providers, such as Fiveways Playcentre in Brighton, reported that identifying tax-free childcare references were removed from payments, so they have been unable to correctly allocate receipts to parents’ accounts.

Technical issues have plagued tax-free childcare since its launch in 2017, and in October last year, it was revealed that over 1,000 complaints had been logged about the service. Following last year's Budget, it was also revealed that projected Government spending on tax-free childcare will be £600m lower than expected in the next four years.   

Neil Leitch added: ‘This latest change to the payment system seems to have taken place without communication, consultation or testing with the sector. Given the HMRC’s track record of technical problems, this is not good enough.

‘There’s no doubt this will have caused an additional, significant administrative burden for providers at a time when they are preparing for the new term.’

Keith Appleyard, treasurer of Fiveways Playcentre, explained that of the 52 children who attend his nursery, 20 are using tax-free childcare and it brings in over £10,000 a term.

He said: ‘It must be a nightmare for those larger settings receiving these payments. I would have thought this would have been tested beforehand – particularly given the problems they’ve had previously.’

HMRC apologised for any inconvenience caused to childcare providers and has said it will be contacting everyone affected with a new personalised reference number.



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