Tax-Free Childcare is a government scheme that tops up your childcare payments by 20%, up to a maximum of £2,000 per child per year (or £4,000 for disabled children). For every £8 you pay in, the government adds £2. It is available to working parents of children aged 0–11 (or 0–16 if disabled).
How It Works
- You open an online Tax-Free Childcare account on GOV.UK for each child
- You pay money into the account
- The government adds 25p for every £1 you deposit (equivalent to a 20% top-up)
- You use the account to pay your childcare provider directly
The maximum government contribution is £500 per quarter (£2,000 per year) per child. To receive the full amount, you need to deposit £8,000 per year — meaning total childcare spending of £10,000 from the account.
Eligibility
Both parents (or the sole parent in a single-parent household) must meet all of these criteria:
- Working: Each parent must earn at least the National Minimum Wage for 16 hours per week — approximately £9,100 per year in 2025/26
- Not earning too much: Each parent must earn less than £100,000 adjusted net income per year
- Not receiving certain benefits: You cannot use Tax-Free Childcare alongside Universal Credit, tax credits, or childcare vouchers for the same child
The child must be under 12 (or under 17 if disabled) and not in a foster care arrangement.
What Counts as Qualifying Childcare?
The scheme covers childcare from Ofsted-registered providers, including:
- Nurseries and preschools
- Childminders
- After-school clubs and holiday clubs
- Play schemes
- Home care workers registered with a home care agency
It does not cover payments to relatives (e.g., grandparents) unless they are registered childminders.
Tax-Free Childcare vs Childcare Vouchers
The older Childcare Voucher scheme closed to new entrants in October 2018, but existing members can continue to use vouchers. Key differences:
| Feature | Tax-Free Childcare | Childcare Vouchers |
|---|---|---|
| Who can join | All eligible parents | Closed to new entrants |
| Maximum benefit | £2,000/child/year | £933/year (Basic Rate) |
| Employer involvement | None required | Must be offered by employer |
| Higher Rate taxpayers | Full £2,000 available | Only £623/year relief |
| Self-employed eligible | Yes | No |
For most families, Tax-Free Childcare provides a larger benefit, especially if you pay Higher Rate tax or are self-employed.
Combining with 30 Hours Free Childcare
Parents of 3- and 4-year-olds may be eligible for 30 hours of free childcare per week during term time. You can use Tax-Free Childcare alongside the 30 hours offer to cover additional hours, meals, or other charges not included in the free entitlement. You apply for both through the same GOV.UK Childcare Service account.
From September 2025, eligible working parents can access 30 hours of free childcare from when their child turns 9 months old.
Reconfirming Eligibility
You must reconfirm your eligibility every 3 months through your online account. If you forget, the government contributions stop. Set a reminder to reconfirm before each quarterly deadline.
Key Takeaway
Tax-Free Childcare is worth up to £2,000 per child per year and is straightforward to set up. If you are a working parent paying for registered childcare, check your eligibility and open an account — the application takes around 20 minutes and the savings start immediately.