Tax-Free Childcare: The Complete Guide for Working Parents
The UK government's Tax-Free Childcare scheme tops up your childcare payments by 20% — effectively giving you free money towards nursery, childminder, and after-school costs. Here's everything you need to know.
What is Tax-Free Childcare?
Tax-Free Childcare (TFC) is a UK government scheme administered by HMRC that helps working parents with the cost of registered childcare. For every 80p you pay into a dedicated government-backed online account, the government adds 20p — up to a maximum of £2,000 per year per child (£4,000 if your child is disabled).
The money in your account can be used to pay for any Ofsted-registered childcare provider in England, including:
- ✓Nurseries and childminders — registered day nurseries, childminders, and pre-schools
- ✓After-school clubs and holiday camps — breakfast clubs, after-school care, and approved holiday providers
- ✓Nannies — as long as they are registered with a childcare agency registered with Ofsted
Simple example: If you spend £800 per month on nursery fees, you deposit £800 into your Tax-Free Childcare account. The government adds £200 (20%), giving you £1,000 to pay your nursery. Over a full year, that's £2,400 in free government contributions — though the maximum cap is £2,000 per year per child.
Who qualifies for Tax-Free Childcare?
To be eligible, you need to meet all of the following criteria:
Both parents must be working
In a two-parent household, both parents must be working. In a single-parent household, only the one parent needs to be working. "Working" is defined broadly — it includes employment, self-employment, and starting a new job within the next 31 days.
Minimum earnings threshold
Each working parent must earn at least the equivalent of 16 hours per week at the National Living Wage — which is approximately £9,518 per year for 2024/25. This is averaged over three months, so earnings don't need to be consistent week-to-week.
Upper income limit — the £100,000 rule
If either parent has an adjusted net income above £100,000, the family loses eligibility entirely. Adjusted net income is your total taxable income minus any salary sacrifice pension contributions, gift aid, and trading losses.
Near the £100,000 limit? If your gross income is slightly above £100,000, increasing your pension contributions through salary sacrifice can reduce your adjusted net income below the threshold — restoring eligibility for both Tax-Free Childcare and the 30-hour free childcare entitlement. Every £1 of additional pension contribution saves you up to 60p in tax and NI while also protecting your childcare entitlement.
Your child's age
- ✓Children aged 0 to 11 years old (up to 1 September after their 11th birthday)
- ✓Children with disabilities up to age 16, with a higher top-up of £4,000/year
- ✕Children who have already started secondary school (unless disabled)
Maternity, paternity, and shared parental leave
Parents on maternity leave, paternity leave, or shared parental leave are treated as meeting the minimum earnings requirement automatically. You can keep your Tax-Free Childcare account active during leave without needing to earn the minimum threshold.
Recently returned from maternity leave? If you took a break from work during maternity leave, you may need to reconfirm your eligibility with HMRC after returning. Check your account status at gov.uk/tax-free-childcare to ensure your code hasn't lapsed.
Tax-Free Childcare and 30-hour free childcare: using both together
Many families can benefit from both schemes simultaneously — they are not mutually exclusive. Here's how they work together:
| Scheme | What it gives you | Who qualifies | Max benefit |
|---|---|---|---|
| 30-hour free childcare | 30 hours per week of free nursery or childminder time during term time (38 weeks) | Working parents of 3–4 year olds (and some 2-year-olds). Both parents must meet earnings criteria. | Approx. £5,000–£7,000/yr depending on local rates |
| Tax-Free Childcare | Government tops up your childcare account by 20% on deposits up to £8,000/yr | Working parents of children aged 0–11. Both parents must meet earnings criteria. | £2,000/yr per child (£4,000 for disabled children) |
| Both together | Use your 30-hour entitlement for term-time sessions, and Tax-Free Childcare to pay for extra hours, meals, wraparound care, or holiday clubs | Must meet criteria for both schemes simultaneously | Up to £9,000+/yr in combined savings |
The most efficient approach is to use your 30-hour code to cover the funded sessions, and then top up any remaining costs — additional hours, meals, activity fees, or holiday childcare — using money from your Tax-Free Childcare account.
How to apply
Applying takes around 20 minutes and is done entirely online through the HMRC Childcare Service.
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Set up a Government Gateway account Go to gov.uk/tax-free-childcare and sign in or create a Government Gateway account. You'll need your National Insurance number and basic personal details.
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Check your eligibility HMRC will ask questions about your work situation, income, and your child's details. If both parents qualify, you'll be approved immediately in most cases.
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Open your childcare account Once approved, HMRC opens an online childcare account (called a "Childcare Service account") for each eligible child. You'll receive a unique reference number for each child.
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Add money and pay your provider Deposit money into your account by bank transfer or debit card. The government top-up is added automatically (usually within 24 hours). Pay your childcare provider directly from the account using their Ofsted registration number.
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Reconfirm every 3 months HMRC will send a reminder every 3 months asking you to confirm you're still eligible. You must reconfirm within the window given — if you miss it, your account will be suspended. This takes just a couple of minutes online.
Key dates and term start dates
For the 30-hour free childcare entitlement, eligibility is activated from the term following your child's relevant birthday. The three term start dates in England are:
For 9-month eligibility (introduced in April 2024 for working parents), the same term-based logic applies — your child becomes eligible from the term following their 9-month birthday.
How salary sacrifice affects your eligibility
Many parents don't realise that how you structure your pay packet directly affects your childcare eligibility. The £100,000 income limit is based on adjusted net income, not gross salary — which means the following can reduce your income for eligibility purposes:
- ✓Pension salary sacrifice — contributions made via salary sacrifice reduce your adjusted net income pound-for-pound, and also save you income tax and National Insurance
- ✓Cycle to Work scheme — the annualised sacrifice reduces your adjusted net income modestly
- ✓Electric car salary sacrifice — leasing an EV through your employer reduces your gross pay and therefore your adjusted net income
Example: If your gross salary is £105,000, you would normally be ineligible for Tax-Free Childcare. But if you contribute £6,000 per year to a salary sacrifice pension, your adjusted net income drops to £99,000 — bringing you back under the £100,000 threshold. You'd save around £3,600 in income tax and NI on that pension contribution, and unlock up to £2,000 per year in Tax-Free Childcare government top-ups.
Frequently asked questions
Yes. Self-employed parents are eligible, provided your expected profit meets the minimum earnings threshold of around £9,518 per year. HMRC will assess your eligibility based on your expected earnings over the next three months. If your income fluctuates, you can still qualify as long as you meet the minimum across the assessment period.
Childcare Vouchers were the predecessor scheme, available to parents who joined before October 2018. If you're already receiving Childcare Vouchers through your employer, you can continue using them but cannot also use Tax-Free Childcare. For most parents who joined after 2018, Tax-Free Childcare offers a better deal — particularly for higher childcare spends — as the £2,000/year top-up typically exceeds the voucher saving.
No. Tax-Free Childcare can only be used for registered childcare costs — not school meals, school trips, uniforms, or activities that aren't provided by a registered childcare provider. Holiday clubs and breakfast or after-school clubs run by registered providers do qualify.
Any money you've deposited stays in your account and can be withdrawn (minus the government top-up) at any time. However, if your account becomes inactive for 24 months, HMRC may close it and return your deposits. The government top-up portion is returned to HMRC if not used.
Generally, both parents must be working to qualify. However, there are exceptions: your partner is exempt from the minimum earnings requirement if they are on maternity, paternity, or shared parental leave; if they have a disability that prevents them from working; or if they are a carer. In these cases, only the working parent needs to meet the income requirements.
The government top-up is usually added to your account within 24 hours of making a deposit, though it can occasionally take a few working days. The money is visible in your account and can be used immediately once it appears.