Tax Free Childcare

Tax Free Childcare

Childcare costs can make it very difficult for working families. The Tax Free Childcare scheme helps reduce some of the financial pressure on working families. Introduced in April 2017, tax free childcare allows eligible parents to save on childcare expenses, making it easier to balance work and family life.

The scheme is available for children aged 0 to 11, or up to 16 if your child has a disability. Around 2 million UK households benefit from the scheme. With more childcare providers signing up, it’s becoming a go-to option for those looking to ease their financial burden. Ready to see how you can benefit? Let’s dive into the essentials of Tax-Free Childcare and how it can help boost your family’s finances.

What you can use Tax-Free Childcare for

Tax-Free Childcare assists with more than just common childcare expenses. It offers flexibility to cover various types of care suitable for different family situations.

If Your Child Is Disabled

For disabled children, Tax-Free Childcare offers increased subsidies. You receive up to £4,000 annually per disabled child instead of the standard £2,000. This can support specialised care needs, ensuring comprehensive assistance. Suitable expenses include personal carers, specialised daycare centres, and activities focused on developmental needs. Ensure your child receives Disability Living Allowance (DLA), Personal Independence Payment (PIP), or a similar benefit to qualify for the higher amount.

If Your Childcare Provider Is in an EEA Country

If your childcare provider is located within the European Economic Area (EEA), you can still use Tax-Free Childcare. The provider must meet the UK’s qualifying childcare standards. Contact HMRC to confirm your provider’s eligibility. This feature benefits families temporarily residing or working in an EEA country, ensuring childcare arrangements abroad remain affordable.

Are you entitled to tax free childcare?

Determining your eligibility for Tax-Free Childcare involves several key factors. Assessing each one carefully can ensure you benefit from the scheme.

If You’re Working

You qualify if you’re employed, self-employed, or a company director. Additionally, you can get Tax-Free Childcare while on sick leave or annual leave. If you’re on shared parental, maternity, paternity, or adoption leave and plan to return to work within 31 days from your application date, you’re eligible too.

If You’re Not Currently Working

Though Tax-Free Childcare generally requires both parents to work, you’ll still be eligible if you or your partner cannot work and receive specific benefits. These include Incapacity Benefit, Severe Disablement Allowance, Carer’s Allowance, or Contribution-Based Employment and Support Allowance. You can also apply if you’re due to start or restart work within the next 31 days.

Your Income

Eligibility depends on your earnings over the next three months. You and your partner, if applicable, must each expect to earn at least £2,379 if aged 21 or over, £1,788 if aged 18-20, or £1,331 if under 18 or an apprentice. If you don’t have a regular income but expect to earn £9,518 a year, you qualify as well. Self-employed individuals with a business started less than 12 months ago can earn less and still be eligible.


To illustrate, if you’re 25 and expect to earn at least £2,379 over the next three months while your partner meets the same criterion, you’re entitled to Tax-Free Childcare. If your partner receives Carer’s Allowance and you’re working, you can still participate in the scheme.

Your Child

Children must be under 12, or under 17 if they have disabilities, to qualify for Tax-Free Childcare. Eligible children can have up to £2,000 annually, or £4,000 if disabled, added to their childcare savings account.

Your Immigration Status

You’re eligible if you meet the working and income requirements and have a right to live in the UK, the Channel Islands, or the Isle of Man. Ensuring your partner, if you have one, meets these criteria is crucial. By considering each of these factors, you can determine your eligibility for the Tax-Free Childcare scheme and take advantage of its benefits.

If you get tax credits, Universal Credit, a childcare bursary or grant, or childcare vouchers

Navigating Tax-Free Childcare while receiving other benefits can be complex. Specific rules apply to tax credits, Universal Credit, childcare vouchers, and bursaries or grants.

Tax Credits

You cannot claim Tax-Free Childcare if you’re receiving any form of tax credits, including Child Tax Credit or Working Tax Credit. Registering for Tax-Free Childcare results in the immediate cessation of your tax credits. Consider using the childcare calculator to determine which option benefits you more before making a change.

Childcare Vouchers

If you want to switch from childcare vouchers to Tax-Free Childcare, notify your employer within 90 days of your application. The vouchers or directly contracted childcare will stop as soon as you join the new scheme. You may also need to provide HMRC with evidence that you have exited the childcare voucher scheme, such as a letter to your employer confirming your exit.

Universal Credit

You can’t receive Universal Credit and Tax-Free Childcare simultaneously. Before cancelling your Universal Credit claim, wait until you receive a decision on your Tax-Free Childcare application. This helps avoid any gaps in support. The interactions between Universal Credit and Tax-Free Childcare are intricate, so seek advice to ensure you’re making the most beneficial choice.


Receiving a childcare bursary or grant makes you ineligible for Tax-Free Childcare. If you or your partner expect to receive a bursary within the next three months, refrain from applying for Tax-Free Childcare. Ensure you evaluate all available support options to maximise your benefits.

How to apply for tax free childcare

Applying for Tax-Free Childcare involves an online process designed to be straightforward and accessible.

If You Have a Partner

If you have a partner, both of you need to meet specific requirements to be eligible. You both must be in work, on sick leave, on annual leave, or on shared parental, maternity, paternity, or adoption leave. If one partner cannot work due to health reasons and receives benefits like Incapacity Benefit, Severe Disablement Allowance, or Carer’s Allowance, you may still qualify if the working partner also meets the income requirements. Each of you needs to earn at least £237.92 per week if you’re 21 or older, £178.88 if you’re aged 18-20, or £133.12 if you’re under 18 or an apprentice. Your combined annual income should also be less than £200,000 to qualify.

If You Are Separated

If you are separated, the eligibility criteria apply individually. The partner who the child lives with most of the time should apply. You need to be in work, on sick leave, on annual leave, or on shared parental, maternity, paternity, or adoption leave (if returning to work within 31 days of your application). You should earn at least the national minimum wage threshold for 16 hours a week for your age group. Additionally, your annual income should be £100,000 or less.

Types of childcare

Different types of childcare are available in the UK, each catering to various needs. Understanding these can help you choose the right care for your child.


Nurseries offer professional care for children from a few months old to school age. These settings provide structured activities, meals, and education. They’re regulated by Ofsted in England and equivalent bodies in other UK nations. Nurseries are ideal if you seek comprehensive full-time childcare.


Childminders are individuals who look after children in their homes. They care for small groups, ensuring a homely environment. Childminders are also registered with local authorities and inspected by regulatory bodies. This option benefits those who prefer a more personal touch in a home setting.


Nannies provide childcare in your home, offering a flexible solution if you have unconventional work hours. They may live in or come daily and handle childcare tasks, including school runs and activities. While nannies don’t need to register with Ofsted, many possess relevant qualifications and experience.

After-school Clubs

These clubs offer care for school-aged children outside regular school hours. They provide supervised activities, homework support, and snacks. After-school clubs support parents needing coverage during after-school hours until early evening.

Holiday Clubs

Holiday clubs operate during school breaks, providing full-day care with various recreational activities. They’re essential for working parents needing childcare during the holidays. These clubs ensure children stay engaged and active.

Preschool Playgroups

Preschool playgroups provide part-time early education sessions for children aged 2-5. They focus on play-based learning and social interaction. Playgroups typically run morning or afternoon sessions, supporting part-time childcare needs. Each childcare type offers distinct benefits. Evaluating your lifestyle, child’s needs, and budget will help you choose the right option.

How much tax-free childcare is worth

Tax-Free Childcare can significantly ease your financial burden by covering up to £2,000 per child each year, or £4,000 if your child is disabled. This scheme ensures that your money goes further, allowing you to afford quality childcare without sacrificing other essential expenses. By understanding the different types of childcare available, you can make informed decisions that best suit your family’s needs. Embracing this opportunity not only supports your child’s development but also enhances your work-life balance. Take advantage of Tax-Free Childcare and invest in your family’s future today.

Frequently Asked Questions

What is the Tax-Free Childcare scheme?

The Tax-Free Childcare scheme helps working families with childcare costs. It provides up to £2,000 per child per year (£4,000 for disabled children).

Who is eligible for Tax-Free Childcare?

Working parents earning at least the National Minimum Wage for 16 hours a week are eligible. Each must earn under £100,000 annually.

How do I apply for Tax-Free Childcare?

Apply online through the Government’s dedicated portal. Be ready with your details and financial information.

Can separated parents both use Tax-Free Childcare?

No, only one parent can claim Tax-Free Childcare. Generally, it’s the parent with primary custody.

How does Tax-Free Childcare interact with other benefits?

You cannot claim Tax-Free Childcare alongside Childcare Vouchers or Universal Credit. Check which option is best for your situation.

What types of childcare are available in the UK?

The UK offers various childcare options, including nurseries, childminders, nannies, after-school clubs, holiday clubs, and preschool playgroups.

How do I choose the right type of childcare?

Consider your child’s needs, your lifestyle, and your budget. Visiting several providers can also help you make an informed decision.

Can I use Tax-Free Childcare for all types of childcare?

Yes, as long as the provider is registered with the scheme. Verify with the provider before proceeding.

How do I switch from Childcare Vouchers to Tax-Free Childcare?

Apply for Tax-Free Childcare and notify your employer in writing within three months to leave the voucher scheme.

What are the advantages of after-school clubs and holiday clubs?

They provide structured activities during out-of-school hours, helping parents balance work and childcare.

How do nurseries differ from childminders?

Nurseries offer structured, centre-based care, while childminders provide home-based care, typically for smaller groups of children.