Tax-Free Childcare is a government scheme that tops up your childcare payments by 20% — for every £8 you pay in, the government adds £2, up to £2,000 per child per year (or £4,000 for disabled children). It is available to working parents and can significantly reduce the cost of nurseries, childminders, and after-school clubs.
Eligibility
Both parents (or the sole parent in a single-parent household) must:
- Be working (employed or self-employed)
- Earn at least the National Minimum Wage for 16 hours/week (approximately £8,600/year)
- Earn no more than £100,000 per year each
- Not already receive childcare through a workplace voucher scheme (you must choose one or the other)
The child must be under 12 (or under 17 if disabled).
How it works
You set up an online childcare account through the GOV.UK Childcare Service. For every £8 you deposit, the government adds £2 — up to a maximum top-up of £500 per quarter (£2,000/year per child).
You then use the account to pay your registered childcare provider directly. The maximum you can deposit to get the full top-up is £10,000/year per child (£8,000 from you + £2,000 from government).
Tax-Free Childcare vs 30 free hours
For 3–4 year olds, you can use Tax-Free Childcare alongside the 30 hours free childcare — but only to cover the hours/costs above the free entitlement (meals, extra sessions, etc.).
You cannot use Tax-Free Childcare at the same time as childcare vouchers or Universal Credit childcare element.
The £100K cliff edge
If either parent earns over £100,000, the entire household loses eligibility for Tax-Free Childcare AND the 30 free hours. This makes pension contributions or salary sacrifice to reduce adjusted net income below £100,000 extremely valuable for parents — potentially saving £2,000+ in childcare support on top of the tax saving.
How to apply
Apply through the GOV.UK Childcare Service. You will need to confirm your eligibility every 3 months (a quick online check). If your circumstances change (income rises above £100K, you stop working), you must report it.
Check your income threshold
Use the income tax calculator to check whether your gross salary is near the £100,000 limit. If you are close, see our £100K tax trap guide and salary sacrifice calculator to model how pension contributions can bring you below the threshold.