Q&A – HMRC answers your questions on Tax-Free Childcare

Katy Morton
Monday, May 15, 2023

Last month, Nursery World invited early years providers to put forward their questions on the Government's Tax-Free Childcare scheme, which HMRC has answered.

HMRC has answered questions put forward by Nursery World readers on Tax-Free Childcare, PHOTO: Adobe Stock
HMRC has answered questions put forward by Nursery World readers on Tax-Free Childcare, PHOTO: Adobe Stock

Question: Why can there be such a delay between parents putting in money and it showing on their account, along with the Government top up? 

Answer: It can take up to 24 hours for payments to show in a Tax-Free Childcare account from the time parents send the payment from their own account. If the payment still isn’t showing after this time, we would recommend getting in touch with the childcare service helpline on 0300 123 4097.

Once the payment is in the childcare account, it can be used to pay the provider.

Q Why does it take a while for the parent payment to show on the provider side?

A It can take up to 48 working hours for the payment to show from when parents send the payment from their Tax-Free Childcare account to the provider. If the payment still isn’t showing after this time, parents or providers should get in touch with the helpline.

Q Is there still an issue with regular parent payments to providers if they fall on a weekend?

A If a payment has fallen on a weekend, it will be made automatically on the next working day. The majority of payments are reconciled within 48 working hours but if parents or providers experience a problem, the childcare service helpline will be able to help.

Q One nursery said that they had complaints from parents as they set-up a payment and it was impacted by the bank holiday. How can this be avoided?

A As with many banking transactions, if a payment falls on a weekend or bank holiday, that payment will be made automatically on the next working day. If the payment still isn’t showing in the account the next working day, parents or providers can call the childcare service helpline.

Q Is there a way HMRC could make it easier for providers to track parent payments through TFC once they come in?

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 Another nursery said some parents were confused as they knew about the TFC limit, but wasn’t aware there was a monthly cap, meaning they get varying amounts of Government top-up added to their account each month.

A Working families, including those who are self-employed, can receive up to £2,000 a year per child –which is £500 every 3 months or £4,000 a year per child (£1,000 every 3 months) if their child is disabled – to put towards the cost of childcare.

Q One nursery raised the issue that many disabled parents are unable to use TFC because they can’t claim that as well as disability? The nursery thought it was unfair.

A Parents can claim Tax-Free Childcare alongside Disability Living Allowance for children or Personal Independence Payments or Carer’s Allowance. If a parent is on Universal Credit, parents can claim Universal Credit childcare. The following guidance may help.

Q Why can't family members who access tax free childcare also access 30 hour childcare? This is an issue for childminders' grandchildren have to move to nurseries at age three.

A This question refers to a difference in rules between Tax-Free Childcare and 30 hours free childcare owned by the Department for Education. Parents are able to claim Tax-Free Childcare support by a grandparent who is a registered childminder.  

Q One provider said they had had parents using just the one account when they have twins or siblings at the same setting and then hit their maximum Government contribution as they were unaware they needed two accounts within the same larger account. Could HMRC make this information clearer to parents please?

A Tax-Free Childcare account is required for each child. If families have more than one eligible child, they will need to register an account for each child. The government top-up is then applied to deposits made for each child, not household.

For every £8 paid into an online account, families will automatically receive an additional £2 from the government. Parents can receive up to £500 every 3 months (£2,000 a year per child), or £1,000 (£4,000 a year) if their child is disabled.  

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