Martin Lewis says 'so many miss out' on childcare help due to 'misleading name'

03 January 2024 , 09:32

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Martin Lewis shared his thoughts on tax-free childcare (Image: No credit)

Martin Lewis has issued a warning to UK households with young children and said many people are missing out on tax-free childcare due to its "misleading name".

Tax-free childcare is an online account which parents and guardians pay into, and then they receive a top up from the Government. For every £8 you pay in, the Government will automatically add in £2 to put toward your childcare costs.

If you’re eligible, you can get up to £500 every three months - up to £2,000 a year - for each of your children. For disabled children, the maximum amount you could get rises to £4,000.

The MoneySavingExpert.com founder took to Twitter/X on Tuesday (January 2) to share his thoughts. He wrote: "Just writing about tax-free childcare, so many miss out, not helped by the appalling, confusing, misleading name. It gives an effective 25% discount to those eligible who save then pay for childcare. It's not about tax, that over-complicates what is a savings account."

He suggested a new name for the scheme, such as "help for childcare savings". In response, one social media user called Anthony suggested scrapping tax-free childcare altogether and increasing Child Benefit instead.

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He said: "Scrap tax-free childcare and 30 hour funding. Significantly increase Child Benefit, get rid of the ridiculous cap at 60k based on one person's earnings. Efficiency savings for govt and admin savings for childcare settings. Ensure parents don't lose out!"

However, Martin disagreed, replying: "Don't you think that would be very poorly targeted? Most childcare is for pre-5 year olds, some rest junior schools. Child Benefit applies up to age 19 in full time education. (though I agree with the way the cap's set up being ridiculous)."

Matt added: "Many think that if one parent owns over the threshold then neither can claim. The person on lower salary can still claim and thousands has been paid out in backdated payments!!" The MoneySavingExpert.com founder clarified: "Not with tax-free childcare I'm afraid - if one parent earns over £100,000 neither can claim."

Robin pointed out: "Tax-free is also a misnomer because our monthly bill is £1,200 which means a portion of it gets no discount. The £500 three-monthly top up cap is short of the £720 we would need it to be for our childcare to be 'tax free'."

* An AI tool was used to add an extra layer to the editing process for this story. You can report any errors to [email protected]

James Rodger