Tax-free childcare boost for parents of disabled children

Ministers have decided to amend legislation to raise the maximum amount that parents of disabled children can pay into their childcare accounts, in recognition of the higher childcare costs families face.

Campaigners had called for the change during the Government’s consultation on the plans and at the committee stage of the Childcare Payments Bill, which was passed in December.

Tax-free childcare will be introduced in autumn this year. Under the scheme the Government will contribute 20 per cent of the cost of each child's childcare, up to a maximum of £2,000 per child per year.

For accounts for disabled children, the maximum payment for a standard three-month entitlement period will be doubled to £4,000. This means that a parent with a disabled child will be able to pay up to £16,000 into their childcare account per year and receive top-up payments of up to £4,000.

Amanda Batten, chief executive at Contact a Family, said, ‘This will be very welcome news for many families with disabled children who face much higher than average childcare costs. We know there is a hidden and talented workforce out there – the mothers of disabled children who need and want to work. Yet only 16% of these mothers work compared to 60% of other mothers.

‘Over the last decade piecemeal policies, have led to confusion among local authorities and childcare providers about their duties to provide childcare for disabled children. Ahead of the next general election all political parties must commit to tackling the lack of affordable and quality childcare for disabled children once and for all.’

However, some criticism has been directed at the scheme, with the Pre-school Learning Alliance concerned that the change would not help families that would need the most help with childcare costs.

It highlighted that only those parents of disabled children that can afford to pay more than the previous limit of £8,000 per year into their childcare accounts will receive any extra financial support from Government.

The charity said it would have been better to have raised the rate of top-up for parents of disabled children so that all families would benefit, not just better-off parents.

Neil Leitch, chief executive of the Pre-school Learning Alliance, said, ‘The tax-free childcare scheme is already regressive in nature, as the more a family can afford to pay into their childcare account, the more financial support they receive from Government.

‘We would argue, therefore, that it would have been far more practical for the government to increase the proportional rate of top-up for parents of disabled childcare above the current rate of 20%. A change of this kind would have ensured that all eligible families benefitted from additional financial support, not just those that can afford to spend large amounts on childcare.’

The changes were confirmed in HMRC’s response to the technical consultation on the draft secondary legislation for the Childcare Payments Act, which states that section 19 of the Act will be amended separately.