Interactive Investor

ii comments on tax-free childcare statistics

The scheme is a game-changer for eligible parents amid the cost-of-living squeeze – but uptake is still lower than original estimates.

17th August 2023 10:47

by Myron Jobson from interactive investor

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Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Amid the relentless cost-of-living crisis, the tax-free childcare scheme offers a glimmer of financial reprieve for parents. It essentially offers a helping hand to beleaguered parents grappling with the weighty burden of childcare expenses.

“It offers a government top-up of 20% on childcare costs, up to £2,000 a year (or £4,000 for disabled children), which is a game-changer for eligible parents in these tumultuous times.

“More and more families are making use of the tax-free childcare initiative, but the uptake of the scheme continues to fall far below original estimates. The government’s impact assessment for tax-free childcare estimated that around 2.3 million families will be eligible, of which 1.5 million are likely to have qualifying childcare costs.

“Yet only 470,000 families used tax-free childcare for 569,000 children in June 2023. There is a clear chasm, not gap, between the number of eligible families and those with an open account. There is also an alarming difference between the number of open accounts and those that were being used.

“The government continues to spend less on the scheme than it had planned. The forecasted spending in 2019 was £865 million – but the actual spending in that year was £629 million less (£236 million).

“Greater, and more creative, promotion of the initiative is needed as a large proportion of parents were unaware of its existence.”

Key points

  • Approximately 470,000 families used tax-free childcare for 569,000 children in June 2023, which compares to 477,000 families using tax-free childcare for 577,000 children in March 2023
  • The government spent £53.6 million on top-up for families in June 2023. This is £12.0 million higher than in June 2022
  • Tax-free childcare account use and top up reached new highs in May 2023 before falling in June 2023

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