HM Revenue and Customs (HMRC)

Tax-Free Childcare has saved 649,935 families on their childcare costs during the 2022 to 2023 tax year, an increase of more than 137,500 from the previous year according to the latest statistics released by HM Revenue and Customs (HMRC) today (24 May 2023).  

However, PACEY knows that whilst it is a hugely useful scheme for saving families money it can also be a frustrating scheme for both parents and providers to use. We took your questions to HMRC to provide clarity (see Q&A below) and will continue to give feedback in order to help improve the service. 

Q. How does a provider sign up to the scheme? 

A. Any approved or registered childcare provider, including childminders, nurseries, holiday activity clubs, breakfast and after school clubs, can sign up to receive Tax-Free Childcare payments. It’s straightforward to sign up. You will have received an invitation letter to join the scheme from your childcare regulator, you’ll need your 11-digit user ID from this letter, your bank account details and your business post code. However, if you no longer have your user ID, you can request a new one.   

After you’ve signed up, you’ll get a childcare provider account which you can manage yourself and set up with your bank account details. Parents who use Tax-Free Childcare will be able to pay you directly into this account.   

Q. How do parents sign up to the scheme? 

A. Families can search ‘Tax-Free Childcare’ on GOV.UK to check full eligibility and sign up but in summary it’s for working parents or guardians who:  

• have a child or children aged up to 11. They stop being eligible on 1 September after their 11th birthday. If their child has a disability, they can receive support until 1 September after the 16th birthday  
• earn, or expect to earn, at least the National Minimum Wage or Living Wage for 16 hours a week, on average  
• each earn under £100,000 per annum  
• do not receive tax credits, Universal Credit or childcare vouchers  

It’s simple to open a Tax-Free childcare account via GOV.UK and only takes about 20 minutes. Accounts can be opened at any time of the year and can be used straight away, money can be deposited at any time and used when needed. Any unused money can be simply withdrawn at any time.   

Account holders will be reminded by HMRC every 3 months to confirm their details are up to date to continue receiving the government top-up.  

Q. Our members say that it is extremely difficult for parents to find them on the system, but once they do, the scheme is a good thing. What are the exact details parents need to give in order to find the correct practitioner quickly?  

A. Once you’re logged into your Tax-Free Childcare account, there’s an option to search for a provider by name, or Ofsted reference, which will bring up the details of your provider or you can search by location or postcode which will bring up a list to choose from in your area.  

Q. One of the time-consuming issues for our members is that they do not get notified when they receive a payment. Will this be changing?  

A. Government banking transfers funds to providers accounts so it really depends on the bank the provider uses – some banks offer alerts to their customers when they receive funds and others don’t.     

Q. Providers with building society accounts do not receive reference numbers for payments and all payments come through as NS&I which makes paperwork more time consuming when you have 3-4 parents paying same amount at same time. How can HMRC help with this? 

A.  HMRC provides parents with childcare reference numbers for banks and building societies.   

When a parent pays their childcare provider using their childcare account, the transaction will appear on the provider’s bank statement as National Savings A.  

This entry should also contain the child’s: 

• childcare reference number, made up of 4 letters and 5 numbers. The letters are the first initial and the first 3 letters of the child’s surname, for example, AJON12345 

• Tax-Free Childcare account number. This will be 13 digits long and start with 1100, and should contain the letters TFC, for example, TFC 1100012345678. 

If the providers bank displays payment information differently and you are unable to identify a parent’s payment, you can submit a payment reconciliation form or call the childcare service helpline on 0300 123 4097. 

If a customer’s building society is not including the reference number, then customers need to ask their building society to include it on their banking transactions so they can identify individual parent payments. 

Q. When parents ask why they can’t pay by credit card, what do our members tell them?  

A. As long as the eligibility criteria is met, Tax-Free Childcare accounts can be opened and used like any other account – by putting money into it by direct debit or bank transfer, getting the government top-up added to it and using it to pay for your childcare. Guidance on how to do this is available on the childcare choices website  https://www.childcarechoices.gov.uk/how-to-use-tax-free-childcare/ 

Q. Some payments seem to be instant whereas others seem to be delayed by nearly 2 weeks. When parents send payments early, but they are still delayed in being received by our members, what is the reason for this? 

A. Payments are reconciled within 48 hours, from when parents send the payment from their childcare account to the provider. If parents or providers experience a problem, please get in touch with the childcare service helpline on 0300 123 4097. 

The current customer satisfaction of the ‘Childcare Service’ delivered by HMRC (30 hours free childcare and Tax-Free Childcare) has consistently been over 90% since April 2019 and parent take up of the scheme continues to rise.   

Q. There is a gap in the parents ability to use the system when a childminder moves from an agency to Ofsted (or vice versa). It can sometimes take a couple of weeks for new details to come through when it should be seamless for parents (and the childminder). How can HMRC help with this? 

A. We will use this feedback to discuss with our delivery partners the best way forward to make the movement of childminders more seamless.  

Q. When payments to providers are stopped due to ‘unforeseen transaction and unauthorised person using account’ they must re-register which takes 28 days. Parents relying on this funding, of which they budget for, then cannot use it that month. What assurances can our members give to parents that this is a reliable and consistent scheme worth using? 

A. HMRC is interested to find out about this specific issue and would welcome a conversation to explore this in more detail as we are always looking at ways to improve our services and keen to help all our customers where we can.