AJ Bell press comment – 17 August 2022
Laura Suter, head of personal finance at AJ Bell, comments on the latest tax free childcare figures as government encourages families to register:
“Parents desperate to make their budgets balance in the cost of living crisis have increasingly turned to Government schemes they had overlooked before. Use of tax-free childcare, which gives parents up to £2,000 a year towards their childcare costs, rose to a record high in May this year as people hunted around for ways to boost their income.
“Family budgets are stretched at the moment, with childcare costs rising along with all other bills. But 395,000 families used the Government scheme in May, for 472,000 children. It means the Government handed out £43.8m to help with childcare costs in that one month alone.
“However, there are an estimated 1.3 million families who are thought to be eligible for the scheme, meaning it is still chronically under-used. With the average family in the UK having 1.9 children, it means each family could be getting £3,800 on average towards their childcare costs each year – money that would go a long way to helping in the current bills crunch. Parents are also able to claim more for disabled children, who often have a higher cost of care.
“The Government needs to do more to publicise the scheme directly to parents to highlight the savings they could be making. Many are confused about whether they are eligible, if they can use it for all forms of childcare, or just aren’t aware that the scheme even exists. At a time when many families are having to decide between heating and eating, this handout could hold some families back from the brink.”
Tax-free childcare explained: Families can claim up to £2,000 a year per child towards childcare costs, split into £500 per quarter. For every £8 you pay into the account the Government will add £2. Parents must be working and earning the minimum wage for 16 hours a week or more, but earning less than £100,000 per parent. More details here: https://www.gov.uk/tax-free-childcare
