Portsmouth and Hampshire parents miss out on up to £2,000 a year tax-free childcare

More parents in Portsmouth are getting help with the cost of childcare through a government scheme, new figures reveal – but many could still to be missing out.

Tax-free Childcare topped up working families' spending on childcare by £241m across the UK last year, with thousands more signing up to the scheme.

But HM Revenue and Customs believes around a million eligible households are not making use of the scheme – while industry bosses blame the current funding system for being too complex.

In Portsmouth, HMRC data shows 1,060 parents used the scheme to help with the cost of childcare in 2020-21, up from 910 the previous year.

In Hampshire 10,625 parents used the scheme then, up from 8,600 the previous year.

Families get £2 for every £8 they put into an account set up for childcare spending – up to £2,000 per child per year, or £4,000 for a child with a disability.

It is available for children who are aged 11 and under, or 16 and under if they have a disability.

Yet while more families in Portsmouth are benefitting from the subsidy, a comparison with population estimates suggests many are not.

The used accounts were for 1,270 children in Portsmouth in 2020-21, but the latest population estimates from the Office for National Statistics show there are 30,288 children aged 11 or under in the area.

In Hampshire the used accounts were for 13,380 children in 2020-21, but the ONS estimates there are 190,622 children aged 11 or under in the area.

However, not all children qualify.

Applying parents must be in work and earning at least the equivalent of the national minimum wage for 16 hours per week – currently £142.56 for those aged 23 or over, but less for younger workers.

They are also ineligible if they claim Universal Credit, tax credits, or certain other benefits, or if one of them earns more than £100,000 a year.

Across the UK accounts were used for 461,705 children in 2020-21 – up from 396,365 the year before.

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The Early Years Alliance welcomed the increase in uptake but said it was still ‘significantly lower than projected’, and money not spent should be reinvested into childcare.

The National Day Nurseries Association (NDNA) also said the government must do more to encourage more parents to sign up, adding the current childcare funding system is too complex for parents and providers.

The Department for Education said the hourly funding rates given to local authorities to pay for free childcare places is being increased.

A spokesperson added: ‘This will pay for a rate increase that is higher than the costs nurseries may have faced from the increase to the national living wage this month.’