Around 650,000 families claimed free childcare worth up to £2,000 last year but many are still missing out on the help.
This is 137,000 more, or 27% more, claiming the help than there was the year before according to HMRC.
The childcare support is available through the Government's tax-free childcare scheme.
The scheme allows parents to pay for childcare into an online account, and the Government will then add a certain amount extra on top.
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.
However, last year the average amount claimed per child was only £638 which falls far short of the maximum £2,000 available.
More than one million families are also believed to be eligible for the support, meaning hundreds of thousands are missing out.
With many battling with the cost of living, HMRC has urged parents to take advantage of all the help made available to them.
Last year, £533 million in Government cash was given to help with childcare costs - the office for Budget Responsibility (OBR) however projected that the Government would spend more than £1billion on the scheme in the year.
Victoria Atkins, financial secretary to the Treasury, said: “As a working mum I know that juggling the demands of being a parent and going out to work is difficult.
I understand that many families are also worried about paying bills and are stretching their budget as far as it can go to make ends meet.
"While thousands more working families are benefitting from Tax-Free Childcare, which is making a real difference to their childcare bills, many more are missing out on the help they’re entitled to.
“Parents should check their eligibility and apply online, the top-up could make a big difference to working families at a time they need it most.”
Have you had trouble claiming tax-free childcare? Let us know: mirror.money.saving@mirror.co.uk
How does the tax-free childcare scheme work?
For every £8 you pay into your online account, you'll get a free £2 added on by the Government.
Families can save up to £500 every 3 months for each child or £1,000 if their child is disabled.
This money - which is added directly into the account - must then be spent on a registered childcare provider, such as nurseries, nannies, after school clubs and play schemes.
You can apply for the tax-free childcare scheme through the Gov.uk website.
Both single parents and those living with a partner may be eligible.
Under the current rules, you need to be earning at least the minimum wage, for the equivalent of 16 hours a week - the same goes for your partner if you have one.
Self-employed workers are also eligible if they earn this amount too.
Both you and your partner will also have to earn less than £100,000 a year to qualify for the scheme, and you cannot have two accounts for the same child.
You usually have to be working to claim tax-free childcare, but there are some exceptions.
For example, you may still be able to claim if one of you is working and the other gets Incapacity Benefit, Severe Disablement Allowance, Carer’s Allowance or Employment and Support Allowance.
In terms of the criteria for your children, your child must be aged 11 or under and usually will need to live with you.
If your child is disabled you may get up to £4,000 a year until they’re 17.
To receive this, your child will need to get Disability Living Allowance, Personal Independence Payment or Armed Forces Independence Payment, or be certified as blind or severely sight-impaired.
But before you apply for tax-free childcare, you should check if you even need to pay for childcare at all.
For example, parents of three and four-year-olds can apply for 30 hours free childcare a week.
You can claim tax-free childcare on top of the 30 hours free childcare.
