Tax-Free Childcare New IT solution: Helping Parents Access Government Funds Via Cashless Payment Systems

His Majesty's Revenue and Customs (HMRC) helps families and individuals with targeted financial support, alongside collecting tax to pay for the UK's public services. The department is taking steps to support working parents with their childcare costs by improving access to Tax-Free Childcare (TFC) by introducing a technical enhancement for educational cashless payment systems.

This technical investment supports the government's ambition for wraparound childcare, that no matter where parents live, they should be able to access wraparound childcare for primary-age children in their local area. Enabling access to TFC through cashless payment systems will help many parents access government support more easily.

What is Tax-Free Childcare (TFC)?

Tax-Free Childcare (TFC) is a government childcare support scheme. Eligible parents can get up to £500 every 3 months (up to £2,000 a year) for each of their children to help with the costs of childcare. This goes up to £1,000 every 3 months if a child is disabled (up to £4,000 a year).

Our challenge

Many schools use cashless payment systems to manage and process payments from parents such as dinner money, school trips and before and after school clubs. These applications currently do not allow parents to use government childcare support, with many working parents missing out on childcare funding for breakfast and after school clubs, which they may be entitled to.

Currently parents are only able to access government funding to pay for their childcare by logging into the Childcare Service on gov.uk. We want to help parents, making it easier for them to access government support, through other digital applications.

Your opportunity

HMRC are scoping technical requirements and would like to understand market interest and insight on the effectiveness on potential Application Programming Interfaces (APIs). Our ambition is a smoother customer journey for parents who use cashless payment systems to access government support to reduce their childcare costs. Therefore, we are keen to understand how our APIs can work with cashless payment systems to support eligible working parents access the government funding they are entitled to.

If you are a software company that operates a cashless payment system that has been adopted by schools that parents use to pay for their breakfast and after school costs and would like to find out more about our solution, please contact the team by email at [email protected]

This Information Notice will be available to comment on for sixty days if you wish to contact us. Information received will be treated as confidential.

How Tax-Free Childcare works

• Working parents can open an online Tax-Free Childcare account using their Government Gateway / One Login account. For every £8 a parent pays into their account, the government will pay in £2 for them to use to pay their provider. For example, if a parent's childcare bill was £500/month, they'd multiply £500 x 0.8 to get £400. They'd put £400 into their Tax-Free Childcare account and the remaining £100 (20%) will then be topped up by the Government. Across the year, this reduces £6,000 annual costs to £4,800.
• The scheme is available for children up to 11 years old (up to 16 if disabled) where their parent(s) meet eligibility criteria regarding their income. Information on eligibility criteria can be found on www.gov.uk/tax-free-childcare ↗
• Parent applies for TFC and, if eligible, a TFC account is set up for each child they applied for. Parent then reconfirms their details every three months.
• Parent deposit money into their child's TFC account, government adds top-up, then parent pays out money to a childcare provider that has signed up for TFC.