Tax-Free Childcare is one of the most generous — and underused — government schemes for working families. For every £8 you pay in, the government adds £2. That is up to £2,000 of free money per child per year.
How Tax-Free Childcare Works
The government will set up an online Childcare Service account for each of your eligible children. You pay money into the account, and for every £8 you deposit, the government adds £2.
Think of it as a 20% top-up on what you pay in (or equivalently, the government covers 25% of your total childcare bill).
Maximum Amounts
| You Pay In | Government Top-Up | Total Available | |
|---|---|---|---|
| Per child per year | £8,000 | £2,000 | £10,000 |
| Disabled child per year | £16,000 | £4,000 | £20,000 |
You can pay in as much or as little as you like, whenever you like — the top-up is added automatically each time, up to the quarterly limit.
Eligibility
To qualify for Tax-Free Childcare, both parents (or the sole parent in a single-parent household) must meet these conditions:
- Be working (employed or self-employed).
- Each earn at least £183.63 per month — equivalent to roughly 16 hours per week at the National Minimum Wage.
- Neither earns more than £100,000 per year in adjusted net income.
Your child must be:
- Under 12 years old (or under 17 if they are disabled).
- Not in a household where either parent is already claiming childcare vouchers or the childcare element of Universal Credit.
If one parent is not working, you may still qualify if they are on certain benefits such as Carer’s Allowance, Incapacity Benefit, or Employment and Support Allowance.
Tax-Free Childcare vs Other Schemes
| Feature | Tax-Free Childcare | Childcare Vouchers | UC Childcare Element |
|---|---|---|---|
| Still open to new applicants? | Yes | No (closed Oct 2018) | Yes (via UC claim) |
| Government support | 20% top-up (max £2,000/child) | Tax & NI savings (~£930/year per parent) | Up to 85% of costs (max £1,014.63 for 1 child) |
| Income limit | £100,000 per parent | None (but tax savings vary) | Means-tested |
| Best for | Middle earners (roughly £20K–£100K) | Existing members only | Lower-income families on UC |
| Can combine with 30 hours free? | Yes | Yes | Yes |
You must choose only one of these schemes — you cannot use Tax-Free Childcare alongside the UC childcare element or childcare vouchers.
How to Apply
- Go to childcare-support.gov.uk.
- Check your eligibility using the online tool.
- Set up an account — you will get a separate account for each child.
- Start paying in and the government top-up is added automatically.
- Reconfirm your eligibility every 3 months — if you miss a deadline, top-ups will pause until you reconfirm.
The same application portal is used to apply for 30 hours free childcare for 3- and 4-year-olds — so you can sort both schemes in one go.
What Can Tax-Free Childcare Be Used For?
You pay your childcare provider directly from your Tax-Free Childcare account. Eligible providers include:
- Nurseries and crèches
- Childminders
- After-school clubs and breakfast clubs
- Holiday clubs and play schemes
- Home care workers — registered with an approved agency
The provider must be Ofsted-registered in England (or registered with the equivalent body in Scotland, Wales, or Northern Ireland) and signed up to receive Tax-Free Childcare payments.
Combining With 30 Hours Free Childcare
If your child is aged 3 or 4 and you qualify for the 30 hours free childcare entitlement, you can use Tax-Free Childcare to pay for:
- Hours above the 30 free hours (for example, if your nursery day is longer than the funded sessions).
- Holiday-period childcare (the 30 hours are typically term-time only, or stretched across the year at fewer hours per week).
- Meals and extras charged by the nursery that are not covered by the free entitlement.
This combination can dramatically reduce your overall childcare bill.
Useful Links
- Child Benefit Guide — make sure you are also claiming Child Benefit.
- Universal Credit Guide — if you are on a lower income, the UC childcare element may be more valuable.