Research into the labour market impacts of Tax-Free Childcare
A research report and data tables summarising mixed methodology research into the impact of Tax-Free Childcare on parental labour market participation.
Documents
Details
Overview:
In 2017 the Government introduced the Tax-Free Childcare (TFC) scheme to support working parents afford the childcare that enabled them to continue working. TFC offers up to £2,000 a year per child towards childcare costs, or up to £4,000 a year if a child is disabled. To be eligible, parents must be in work and earn the equivalent of at least 16 hours per week at the National Minimum Wage and no more than £100,000 each per annum, although there are some exceptions to this such as being on sick or parental leave. Children must be 11 or under, or 16 and under if they have a disability, and usually live with the parent.
Report:
HM Revenue and Customs (HMRC) commissioned Ipsos UK to conduct 61 qualitative interviews with parents to assess the extent to which TFC influences the work and childcare choices of working parents and provide an understanding of the links between TFC and labour market participation.
The report highlighted that TFC helped to maintain working patterns among users and made a contribution towards the affordability of childcare. However, the labour market participation of working parents was influenced by a wide range of factors and was typically driven by things other than TFC.
The views in this report are the authors’ own and do not necessarily reflect those of HM Revenue and Customs.
Data tables:
The data tables outline the quantitative research findings from a short survey of 5,332 parents using TFC. The survey was carried out by HMRC to understand whether TFC was affecting the working patterns of users. It was carried out to help HMRC better understand the labour market impacts of TFC.
It included questions on:
- the types of childcare providers used by parents
- parents’ working patterns
- how parents perceive TFC to have affected their working patterns
- (for eligible parents) how parents perceive 30 hours to have affected their working patterns
TFC users included in the sample were those who had used their account (made a payment) in the 3 months prior to the survey (November 2022 – January 2023). The survey ran between 1 February 2023 and 3 March 2023, individuals were invited to participate and sent one reminder email during the fieldwork period.
There was a 24% response rate for the survey (5,332 responses).
We were able to use a unique identifier to add additional data to the survey responses, such as regional information and whether the user was self-employed to provide additional detail to the analysis. Age group analysis was based on the age of the youngest child in the family.
We found that TFC users commonly indicated a positive impact on their job and labour market participation. Most commonly parents reported TFC supporting them to maintain the hours they worked. The extent of the reported impact varied depending on key characteristics, such as whether parents were self-employed, their household status and the age of their youngest child.
The most commonly used childcare provider varied by the child age, for the 0-2 and 3-4 age groups day nurseries were most commonly used, however in the 5+ category outside of school clubs were most prevalent.
The reported impact of TFC on working patterns was broadly similar for respondents, and where they had a partner for partners as well.