Hundreds of thousands of working parents are missing out on a government childcare scheme worth up to £2,000 a year – per child – because they find the system clunky or misunderstand how it works.
Tax-free childcare was rolled out in 2017 to replace childcare vouchers and allows parents to claim £2 from the Government for every £8 they spend on childcare. This is capped at £2,000 a year per child up to the age of 11, or £4,000 a year for disabled children until they’re 16.
But take-up could be higher. Just 543,000 out of 900,000 eligible families are using the scheme as of December 2025, according to Government data.
Even among those who have accounts, many are not actively using them. Government data shows just 42 per cent of open accounts were used last December, down from around 50 per cent in 2024. The government spent £46.6m on tax-free childcare top-ups in December 2025, below its peak of £62.3m in July 2024.
How does it work?
