Budget 2020: tax-free childcare extended

The Budget has included a new measure to boost take-up of the tax-free childcare (TFC) scheme, by making it accessible to parents who use before and after school care

Chancellor Rishi Sunak announced a service improvement that will make TFC compatible with school payment agents operating cashless systems.

This means parents of around 500,000 school-aged children across the UK will be able to put the support towards the cost of their wraparound childcare in before and after school care settings.

Until now support has not been available for those using school payment agents, which run the digital payments systems for schools.

Now these online systems will be integrated with the TFC system so that parents can use the subsidy for breakfast and after-school clubs.

TFC is available to parents, including the self-employed, in the UK with children under 12 (under 17 if disabled).

Parents open an online account to pay for registered childcare, and the childcare provider must be signed up to the scheme.

For every £8 paid in, the government adds an extra £2, up to £2,000 a year for each child, increased to up to £4,000 for a child with disabilities.

Previously, money had to be transferred to a specific account. Now, following the Chancellors announcement, TFC can be transferred to systems such as ParentPay which is in use at more than 11,000 schools and used by about 3m parents.

Take-up of TFC, which followed on from the childcare vouchers scheme, has been slow. HMRC’s own research, published earlier this year, suggested around 1.3m families have qualifying childcare costs and are eligible to be assisted by the scheme but found low levels of awareness had delayed take up.

Parents can use TFC all year round, including during school holidays once they have set up an account, but need to sign back in every three months and confirm that their details are up to date to keep getting government top-ups.

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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