Official Statistics

Tax-Free Childcare statistics: quality report

Updated 17 August 2022

Contact

• Organisation unit - Knowledge, Analysis and Intelligence (KAI)
• Name – J Munns
• Function - Statistician, Benefits and Credits
• Email - TFC.statistics.enquiries@hmrc.gov.uk

Statistical presentation

Data description

Tax-Free Childcare Statistics provides information on the numbers of families and children with open and used Tax-Free Childcare accounts and the amount of government top-up they have received. The statistics also include open and used accounts:

• for families with a self-employed parent
• for disabled children
• by UK regions, Westminster parliamentary constituency and local authority
• by child age

Tax-Free Childcare was launched to the public in April 2017 with a phased roll out by age of the youngest child in a family, completed in February 2018. Children must be aged 11 or under, or 16 and under if they have a disability, to be eligible for Tax-Free Childcare.

For every £8 a parent pays into their Tax-Free Childcare account the government will add an extra £2, up to a maximum of £2,000 per child per year. For disabled children the maximum is £4,000 per year. For more information about Tax-Free Childcare see the HMRC website.

Classification system

Breakdown of number of families, children, employment status, child age, disability status and region are determined based on Tax-Free Childcare applications data.

A unique account number is assigned to each family and child and used to aggregate the data.

Statistical concepts and definitions

Financial year

Statistics are provided by financial years. A financial year stretches from 1st April until 31st March the following calendar year.

Open account

An open Tax-Free Childcare account is one where a family has met the eligibility criteria and is within their eligibility period according to data held by HMRC on their administrative systems.

The eligibility period is the period where families receive top-up on any payments made through their account and usually lasts around 3 months. At the end of this period families are required to reconfirm their eligibility, and the period starts anew.

Used account

A used account is one where a payment is made from the account to a childcare provider within the month or year according to transactions data provided to HMRC by National Savings and Investments. The date at which a payment is made does not necessarily correspond to when children use childcare.

Identifying a child and a family

Families who register for Tax-Free Childcare are assigned a unique claim identifier within HMRC’s internal data. Children whose parents register are also given a unique identifier. It is therefore possible to link data across multiple children where they belong to the same family.

The relationship between Tax-Free Childcare and 30 hours free childcare

In September 2017 the government launched its offer of 30 free hours of childcare in England for children aged 3 and 4 (although parents were able to apply for and therefore open a 30 hours account from April 2017).

Parents apply and have their eligibility checked for 30 hours free childcare via the childcare service, the online application for Tax-Free Childcare and 30 hours free childcare. If a parent is found to be eligible, they will be given a 30 hours eligibility code.

A parent should take this code along with their national insurance number and their child’s date of birth to their chosen childcare provider. The provider will either directly, or via their local authority, use the Department for Education’s Eligibility Checking System (ECS) to confirm the validity of the code.

Once the 30 hours eligibility code has been validated via the ECS, the child will be able to take up their 30 hours place.

In applying for 30 hours free childcare, many families find that they are also eligible for Tax-Free Childcare and a Tax-Free Childcare account is often also opened for them. This contributes to the discrepancy between open and used Tax-Free Childcare accounts that is seen in the data in the tables accompanying this release. For this reason, used accounts are considered as the best measure of take up of Tax-Free Childcare.

From April 2024, this offer was expanded to also include 15 hours free weekly childcare entitlement for children aged 2 years of eligible working parents. This was followed up by 15 hours free weekly childcare entitlement for children aged 9 months of eligible working parents in September 2024. All children under 5 years will be entitled to 30 hours in September 2025.

Government top-up and how is it calculated

For every £8 a parent pays into their Tax-Free Childcare account the government will add an extra £2, up to a maximum of £2,000 per child per year. For disabled children the maximum is £4,000 per year.

The monthly and annual top-up amounts are the total top up that the government has spent in this period. Annual totals are equal to the 12 months in the year. The monthly totals also include some backdated payments to families who did not initially receive their expected top-up.

Self-employed status

Self-employed parents were not eligible for childcare vouchers but are eligible for Tax-Free Childcare. Families with a self-employed parent are defined according to a flag that exists on HMRC’s Tax-Free Childcare administrative data. This is based on details provided by parents during their application, including their unique taxpayer reference (UTR).

For monthly data, the latest record on a parent’s self-employed status is looked at the end of each calendar month. For annual data, the monthly data sets are combined so that the annual number of families with a self-employed parent and open or used account, are any families with a self-employed parent and open or used account in any of the months in the year.

This method reflects the fact that parents may change whether they are self-employed throughout the year.

Disability flag

Children with a disability are defined according to a flag that exists on HMRC’s Tax-Free Childcare administrative data. HMRC has access to Department for Work and Pensions records to confirm where disability living allowance (DLA) or personal independence payments (PIP) are received for a child, or a child has a Certificate of Visual Impairment (CVI).

For monthly data, the latest record on a child’s disabled status is looked at the end of each calendar month. For annual data, the monthly data sets are combined so that the annual number of disabled children with an open or used account, are those with an open or used account at any month in the year.

Geographical allocation

In order to allocate a family to a region, parents’ details are linked to the postcode held on the HMRC central repository of address information. This data receives information from other HMRC tax and benefit administrative systems and from Department for Work and Pensions.

For annual data presented in table 6, a family’s latest available address record within the 12-month period is used. The sum of all regions in the tables may not equal the United Kingdom total because it has not been possible to allocate all families or children to a region. Families or children not allocated to a region are still counted within the United Kingdom total.

For monthly data presented in tables 13 and 14 postcode information is extracted soon after the end of the quarter (for the quarter April to June 2022 postcodes were extracted from administrative systems at the start of July 2022). This methodology will be followed for future time periods.

The methodology used in tables 13 and 14 is different for months prior to January 2021. Tables 13 and 14 were first published in February 2021 including outturn to December 2020. For all months between April 2017 and October 2020 the postcode information used was extracted from administrative systems in September 2020.

This means that for all months before October 2020 accounts are displayed in the regions in which families were living in September 2020, so if a family was living in a different region before September 2020 this will not be reflected in the tables.

Calculating children’s ages

Children’s ages are calculated using the child’s date of birth which HMRC holds on its administrative Tax-Free Childcare data. Ages are calculated on the last day of each calendar month, so where a child has a birthday in a particular month, they will be assigned to the older age category.

The sum of all ages in the tables may not equal the United Kingdom total because child date of birth information is not available. Children without a calculated age are still counted within the United Kingdom total.

Statistical unit

The unit in the statistics is children or families with open Tax-Free Childcare accounts, or children or families who use their Tax-Free Childcare accounts.

Statistical population

All families who have an open Tax-Free Childcare account.

Reference area

The geographic region covered by the data is the United Kingdom (UK). Data is broken down by Government Office Region, Local Authority and Westminster Parliamentary Constituency.

Time coverage

The statistics cover the time period from April 2017 until the end of the most recent available quarter, currently September 2024.

Statistical processing

Source data

Tax-Free Childcare application data

The data for Tax-Free Childcare applications is collected through the Childcare Service, administered by NS&I. This information is provided by Tax-Free Childcare users when they apply for the service, and when they reconfirm their eligibility for it.

This data source provides the number of open Tax-Free Childcare accounts, along with information about families and children with open accounts (eg. self-employment or disability status and age of children).

Tax-Free Childcare transactions data

Transactions data shows payments made from Tax-Free Childcare accounts. This is administered by NS&I. This data source provides information about whether Tax-Free Childcare accounts have been used within a specific time period.

Government top-up

Monthly Government top-up values are provided on an aggregated basis by NS&I approximately 6 weeks after the end of the reference month.

National Statistics Postcodes Lookup

Postcodes from Tax-Free Childcare administrative data are matched to NSPL to get geographical breakdowns.

Frequency of data collection

Data for Tax-Free Childcare applications is downloaded every night into databases for analysis the following day.

Government top-up values are provided to HMRC in an excel document on a monthly basis.

Data collection

Administrative data is collected through the Childcare Service, administered by NS&I, and transferred daily to HMRC database EDH. Data is extracted from EDH by analysts and analysis is produced in SAS or R. Checks are applied to data extracted from EDH to check that information is available for the full time period expected, and number of application are checked for consistency.

Data validation

Checks carried out on the data include:

• checking and validating source data, including checking that data covers the expected period
• validating statistics after compilation by comparing trends over time and relationships between tables
• identifying inconsistencies between the output data and other related datasets by comparing to monthly outturn monitoring results

Data compilation

Procedures for combining data from different sources

Data from different sources is combined using SAS. Data is combined using Tax-Free Childcare account identifiers.

Aggregating data

Data are aggregated using family and child account numbers.

Quality Management

Our statistical practice is regulated by the Office for Statistics Regulation (OSR). OSR sets the standards of trustworthiness, quality and value in the Code of Practice for Statistics that all producers of official statistics should adhere to. You are welcome to contact us directly with any comments about how we meet these standards by emailing TFC.statistics.enquiries@hmrc.gov.uk. Alternatively, you can contact OSR by emailing regulation@statistics.gov.uk or via the OSR website.

Quality assurance

All official statistics produced by KAI, must meet the standards in the Code of Practice for Statistics produced by the UK Statistics Authority and all analysts adhere to best practice as set out in the ‘Quality’ pillar.

Analytical Quality Assurance describes the arrangements and procedures put in place to ensure analytical outputs are error free and fit-for-purpose. It is an essential part of KAI’s way of working as the complexity of our work and the speed at which we are asked to provide advice means there is a high risk of error which can have serious consequences on KAI’s and HMRC’s reputation, decisions, and in turn on peoples’ lives.

Every piece of analysis is unique, and as a result there is no single quality assurance (QA) checklist that contains all the QA tasks needed for every project. Nonetheless, analysts in KAI use a checklist that summarises the key QA tasks, and is used as a starting point for teams when they are considering what QA actions to undertake.

Teams amend and adapt it as they see fit, to take account of the level of risk associated with their analysis, and the different QA tasks that are relevant to the work.

At the start of a project, during the planning stage, analysts and managers make a risk-based decision on what level of QA is required.

Analysts and managers construct a plan for all the QA tasks that will need to be completed, along with documentation on how each of those tasks are to be carried out, and turn this list into a QA checklist specific to the project.

Analysts carry out the QA tasks, update the checklist, and pass onto the Senior Responsible Officer for review and eventual sign off.

Quality assessment

The QA for this project adhered to the framework described in ‘4.1 Quality assurance’ and the specific procedures undertaken were as follows:

Stage 1 – Specifying the question

Up to date documentation was agreed with stakeholders setting out outputs needed and by when; how the outputs will be used; and all the parameters required for the analysis.

Stage 2 – Developing the methodology

Methodology was agreed and developed in collaboration with stakeholders and others with relevant expertise, ensuring it was fit for purpose and would deliver the required outputs.

Stage 3 – Building and populating a model/piece of code

• analysis was produced using the most appropriate software and in line with good practice guidance
• data inputs were checked to ensure they were fit-for-purpose by reviewing available documentation and, where possible, through direct contact with data suppliers
• QA of the input data was carried out
• the analysis was audited by someone other than the lead analyst – checking code and methodology

Stage 4 – Running and testing the model/code

• results were compared with those produced in previous years and differences understood and determined to be genuine
• results were compared with comparable independent estimates, and differences understood
• results were determined to be explainable and in line with expectations

Stage 5 – Drafting the final output

• checks were completed to ensure internal consistency (e.g. totals equal the sum of the components)
• the final outputs were independently proof read and checked

Relevance

User needs

This analysis is likely to be of interest to users under the following broad headings:

• national government – policy makers and MPs
• regional and local governments
• academia and research bodies
• media
• childcare providers
• general public

User satisfaction

Formal investigations into user satisfaction have not been undertaken, however KAI are always open to ideas for new analysis to meet changing user requirements.

Completeness

Tax-Free Childcare is a digital service, all necessary information is available.

Accuracy and reliability

Overall accuracy

This analysis is based on administrative data, and accuracy is addressed by eliminating non-sampling errors as much as possible through adherence to the quality assurance framework.

The potential sources of error include:

• Tax-Free Childcare users entering incorrect information in their applications
• human or software error when extracting information from EDH
• latest postcode information not being available
• matching postcodes to the incorrect NSPL
• mistakes in the programming code used to analyse the data and produce the statistics

Sampling error

Data comes from administrative systems. Sampling error is therefore not relevant.

Non-sampling error

Coverage error

Tax-Free Childcare is a digital service, all applications and payments data is captured in administrative data. Coverage error is therefore not relevant.

Measurement error

The main source of measurement error could be categorised as respondent errors, eg incorrect information provided on Tax-Free Childcare application or information not updated by users at reconfirmation.

Non-response error

Families who use Tax-Free Childcare are required to reconfirm their accounts every three months. Families are not entitled to access government top up if they do not reconfirm. Therefore non-response error is not relevant for these statistics.

Processing error

It is possible that errors exist in the programming code used to analyse the data and produce the statistics. This risk is reduced through developing a good understanding of the Tax-Free Childcare system, and thoroughly reviewing and testing the programs that are used.

Data revision

Data revision – policy

The United Kingdom Statistics Authority (UKSA) Code of Practice for Official Statistics requires all producers of Official Statistics to publish transparent guidance on the policy for revisions.

Data revision – practice

This analysis is published quarterly. Revisions are not routine but may occur for a number of reasons, eg. as a result of more up to date postcode information being available for the monthly geographical breakdown, or as a result of an error found in processing. Where revisions are made the reason for them will be explained in the commentary.

Seasonal adjustment

Seasonal adjustment is not applied to this analysis.

Timeliness and punctuality

Timeliness

Data is published quarterly, the lag between the end of the final month in the quarter and publication is around 7 weeks. Annual data is published around 7 weeks after the end of the financial year.

Punctuality

In accordance with the Code of Practice for official statistics, the exact date of publication will be given not less than one calendar month before publication on both the Schedule of updates for HMRC’s statistics and the Research and statistics calendar of GOV.UK.

Any delays to the publication date will be announced on the HMRC National Statistics website.

Coherence and comparability

Geographical comparability

This analysis is presented for the United Kingdom.

Tables are included showing a breakdown at Government Office Region level, and also by Local Authority and Westminster Parliamentary Constituency.

Comparability over time

Tax-Free Childcare was launched to the public in April 2017 with a phased roll out by age of the youngest child in a family, completed in February 2018. From March 2018 onwards, following completion of the roll out, there is comparability in coverage.

Coherence – cross domain

There are no coherence issues between statistical domains or data sources.

Coherence – sub-annual and annual statistics

Monthly and annual figures are included in these statistics.

For the purposes of these statistics monthly open account figures are calculated as the number of families with an open account on the last day of each calendar month. A similar calculation is done for the number of children.

Annual open account figures are calculated as the numbers with an open account on the last day of any of the 12 months April to March. Using this measure, families or children are likely to have open accounts in multiple months but will only be counted once in the annual figures. This means that the annual number of open accounts will not equal the sum of the 12 months in the year.

The number of used accounts for families is calculated as the number of families making a payment in the period. For children used accounts are calculated as the number of children whose parents make a payment to a childcare provider on the child’s behalf. Because families or children have used accounts in multiple months this means that the annual number of used accounts will not equal the sum of the 12 months in the year.

Coherence – internal

Rounding of numbers may cause some minor internal coherence issues as the figures within a table may not sum to the total displayed. Effort has been made to ensure totals between tables remain constant where appropriate.

Accessibility and clarity

News release

A press release in May 2023 650,000 families cut childcare costs using Tax-Free Childcare references the statistics published in May 2023.

Publication

The tables and associated commentary are published on the Tax-Free Childcare quarterly statistics webpage of GOV.UK.

Tables are published in the OpenDocument format, and the associated commentary in an HTML format.

Both documents comply with the accessibility regulations set out in the Public Sector Bodies (Websites and Mobile Applications) (No. 2) Accessibility Regulations 2018.

Further information can be found in HMRC’s accessible documents policy.

Online databases

This analysis is not used in any online databases.

Micro-data access

Access to this data is not possible in micro-data form, due to HMRC’s responsibilities around maintaining confidentiality of taxpayer information.

Other

There are no other dissemination formats available for this analysis.

Documentation on methodology

Background and guidance to interpreting Tax-Free Childcare statistics is available to users as annexes in statistical commentaries.

Quality documentation

All official statistics produced by KAI, must meet the standards in the Code of Practice for Statistics produced by the UK Statistics Authority and all analysts adhere to best practice as set out in the ‘Quality’ pillar.

Information about quality procedures for this analysis can be found section 4 of this document.

Cost and burden

Because all necessary data for the Tax-Free Childcare Statistics is obtained from an administrative data source there is no additional burden on families to provide information.

It is estimated to take about 7 days FTE to produce the quarterly analysis and publication.

Confidentiality

Confidentiality – policy

HMRC has a legal duty to maintain the confidentiality of taxpayer information.

Section 18(1) of the Commissioners for Revenue and Customs Act 2005 (CRCA) sets out our duty of confidentiality.

This analysis complies with this requirement.

Confidentiality – data treatment

The statistics in these tables are presented at an aggregate level so identification of individual families or children is minimised, but potentially still possible. Where potential risks exist, statistical disclosure control (SDC) is applied to cells within tables. SDC is the application of methods to ensure confidential data is not disclosed to parties who don’t have authority to access it.

SDC modifies data so that the risk of data subjects being identified is within acceptable limits while making the data as useful as possible.

Disclosure in this analysis is avoided by applying rules that prevent categories of data containing:

• small numbers of contributors, and
• small numbers of contributors that are very dominant

If a cell within a table is determined to be disclosive, its contents are suppressed either by removing the data or combining categories.

Further information on anonymisation and data confidentiality best practice can be found on the Government Statistical Service’s website.

Other Publications on Childcare

These are some other publications on childcare:

• Childcare and early years provider survey
• Education provision: children under 5 years of age
• Early years funding: 2024 to 2025
• Family Resources Survey: financial year 2021 to 2022