From October, families claiming family credit, disability working allowance, housing benefit and council tax benefit from October 3rd, will have childcare costs of up to £40 a week offset against their earnings when their benefit entitlement is assessed.
Families claiming family credit could receive up to £28 extra each week in their benefit.
Approximately 50,000 families are expected to take up work as a direct result of this measure. In addition, 100,000 families currently in work will receive more benefit each week.
Peter Lilley said: 'These measures will provide a real incentive to encourage parents to return to the job market.
'Lone parents, in particular, who also have the first £15 of child maintenance disregarded in family credit, will be significantly better off in work with this additional help towards their childcare costs.
'The £40 disregard exceeds the figure of £35 advocated by the Daycare Trust, and families claiming family credit after October 3rd could receive extra money in their benefit each week.'