Suggestions on calming down heat in red sauce ?

Try oat milk or, if you can find it, oat cream/yogurt. It will act like the dairy and neutralize the heat. Coconut yogurt might work too, but test it on a small batch to ensure you’re not making coconutty sauce!

Some olive oil will let the heat dissipate across your palate (and theirs) more readily, diminishing its perception.

Or cook some potatoes in the sauce.
Then remove and serve them to adults.
Then taste sauce and see If it is tamed enough forctge childrens taste.
The potatoes will (as in patates bravas) have absorbed some of the heat.

Sugar will to a great extent counteract it, and the kids might approve, but I wouldn't really recommend it.

I would make another batch of the sauce and dilute the spicy sauce.

Should have added, but be dairy, gluten, egg, nut and soy free

Hey Lara! Some cream or butter should tone down the spice.