Tax-Free Childcare 2026/27: Worked Examples
Tax-Free Childcare 2026/27: £2 added for every £8 you pay in, up to £2,000 per child a year, the £100,000 income limit and 5 worked family scenarios.
2026/27 Tax-Free Childcare at a glance
Max top-up per child / year
£2,000
£2 for every £8 you pay in (20% of the bill), capped at £500 every 3 months
Disabled child / year
£4,000
Until the September after they turn 16 (11 otherwise). Needs DLA, PIP, AFIP, Child or Adult Disability Payment, or certification as blind or severely sight impaired.
Income limit
£100,000
Expected adjusted net income for the tax year, each partner. A cliff, not a taper.
How the £8 to £10 top-up works
- Apply through the gov.uk childcare account; you get an account for each child.
- Meet the tests: each partner in work and expecting to earn at least £2,643.68 over the next 3 months if 21 or over (£2,256.80 if 18 to 20, £1,664.00 if under 18 or an apprentice), and neither expecting adjusted net income over £100,000 for the tax year.
- Pay in by Direct Debit, standing order or bank transfer. The payment and the government's top-up usually appear within one working day.
- For every £8 you pay in the government adds £2, up to £500 per child every 3 months (£2,000 a year).
- Pay your childcare provider from the account.
- Sign in every 3 months to confirm your details are up to date, or the top-ups stop.
5 worked family scenarios
Incomes are adjusted net income; childcare costs are illustrative. Top-ups from the site's Tax-Free Childcare calculator.
| Family | Childcare cost / yr | Eligible? | Gov top-up | Net cost |
|---|---|---|---|---|
| Two basic-rate earners, 1 child at nursery Both in work, both well under £100,000. | £14,400 | YES Meets the income and work tests | £2,000 | £12,400 |
| Two earners, 2 children One higher-rate taxpayer; both under £100,000, so each child gets the full top-up. | £24,000 | YES Meets the income and work tests | £4,000 | £20,000 |
| One earner on £95,000, partner not working, 1 child A couple both need to be in work, unless the non-working partner gets a qualifying benefit such as Carer's Allowance. | £18,000 | NO Both partners must be in work (or the non-working partner must get a qualifying benefit) | £0 | £18,000 |
| Two earners, one over £100,000 One partner expects adjusted net income over £100,000, so the household cannot claim. | £26,400 | NO A partner expects adjusted net income over £100,000 | £0 | £26,400 |
| Two earners, both just under £100,000 The limit applies to each partner separately, so a £194,000 household can still claim. | £26,400 | YES Meets the income and work tests | £4,000 | £22,400 |
The £100,000 cliff
Tax-Free Childcare stops completely if either partner expects adjusted net income over £100,000 for the tax year. There is no taper: a family with two children getting the full top-up loses up to £4,000 a year when one partner goes £1 over.
The same £100,000 is where the Personal Allowance starts to taper (£1 of allowance lost for every £2 of income above it), which is why income just over the line is so expensive. The High Income Child Benefit Charge is a separate test: it starts at £60,000 and takes back all the Child Benefit at £80,000, so at £100,000 it is already at its maximum and does not change.
Mitigation: pension contributions reduce adjusted net income. A parent on £105,000 with a £20,000 bonus has £125,000; sacrificing £25,000 into a pension brings that to £100,000, which keeps Tax-Free Childcare and the full Personal Allowance. The Child Benefit charge still applies in full, because £100,000 is above £80,000.
Tax-Free Childcare vs childcare vouchers
| Feature | Tax-Free Childcare | Childcare vouchers |
|---|---|---|
| Who can join | Open to eligible parents | Only if you joined and your wages were adjusted on or before 4 October 2018 |
| Max benefit (2026/27) | £2,000 per child a year | About £801 per parent a year (basic rate), £612 higher rate, £611 additional rate* |
| Income limit | £100,000 each partner (cliff) | None |
| Needs an employer scheme | No - self-employed parents can claim | Yes |
*Income Tax and employee National Insurance saved on £55 a week (basic rate), £28 (higher) or £25 (additional), the limits for anyone who joined from 6 April 2011 (HMRC EIM16053); earlier joiners keep £55 a week.
Existing voucher holders can keep them as long as they do not take an unpaid career break of more than a year. You cannot get new vouchers and Tax-Free Childcare at the same time: you must tell your employer within 90 days of applying for Tax-Free Childcare, and once you have, you cannot rejoin the voucher scheme. The gov.uk childcare calculator compares the two for your family.
Related calculators and guides
- Tax-Free Childcare calculator - the £8 to £10 top-up for your own costs.
- Child Benefit tax charge (HICBC) - the other family income test (£60,000 to £80,000).
- £100k tax trap - the Personal Allowance taper that starts at the same £100,000.
- Higher-rate tax 40% guide - the higher-rate band below the £100,000 limit.
- Salary sacrifice 2026/27 - how pension sacrifice reduces adjusted net income.
- Max pension contribution calculator - the annual allowance and carry-forward.
- Universal Credit calculator - UC pays up to 85% of childcare costs, but cannot be claimed alongside Tax-Free Childcare.
- Maternity pay calculator - Statutory Maternity Pay for new parents.
Frequently asked questions
What is Tax-Free Childcare and how does it work in 2026/27?
Tax-Free Childcare is a government scheme run by HMRC. You open a childcare account for each child; for every £8 you pay in, the government adds £2, so the government pays 20% of the bill. The top-up is capped at £500 every 3 months per child (up to £2,000 a year), or £1,000 every 3 months (up to £4,000 a year) for a disabled child. You pay your provider from the account, and you must sign in every 3 months to confirm your details or the top-ups stop.
Who is eligible for Tax-Free Childcare?
Your child must be under the age limit (until the September after they turn 11, or 16 if disabled) and usually live with you. You, and your partner if you have one, must usually be in work (employed or self-employed, including on sick, annual, maternity, paternity, shared parental or adoption leave) and each expect to earn at least £2,643.68 over the next 3 months if aged 21 or over: 16 hours a week at the £12.71 National Living Wage. Neither of you can expect adjusted net income over £100,000 for the tax year. You need a National Insurance number and a qualifying immigration status. You cannot get it while claiming Universal Credit or childcare vouchers, for a foster child, or with a childcare bursary or grant.
What is the £100,000 limit and how is it tested?
It is a cliff, not a taper: if either partner expects adjusted net income over £100,000 for the current tax year, the household cannot claim for any child (Childcare Payments (Eligibility) Regulations 2015, reg. 15). The test is your expected income for the whole tax year, not each 3-month period. A household with two children that would otherwise get the full top-up loses up to £4,000 a year. Pension contributions reduce adjusted net income, so paying more into a pension (including by salary sacrifice) can bring income back under the limit.
How does Tax-Free Childcare work with free childcare hours?
You can use both. In England, Free Childcare for Working Parents gives up to 30 hours a week for children aged 9 months to 4 years where both parents work and meet the same kind of income tests; all 3 and 4 year olds can get 15 hours a week for 38 weeks of the year. The free hours are funded directly to the provider using an 11-digit code you get through the same childcare account. Tax-Free Childcare can then pay for extra hours and for extras the provider supplies, such as meals, nappies and trips. Scotland, Wales and Northern Ireland run different schemes.
How does the £8 to £10 top-up actually work?
You pay into the childcare account by Direct Debit, standing order or bank transfer. The payment usually appears within one working day and the government's top-up is added at the same time. Example: a £1,000 monthly bill. You pay in £800, the government adds £200, and you pay £1,000 to the provider. Because the top-up is capped at £500 per child every 3 months, paying in a large sum in one period only attracts £500 of top-up, so spreading payments across the year captures more of the £2,000. To get the full annual top-up you need £10,000 of childcare a year per child.
Tax-Free Childcare or childcare vouchers: which is better?
Childcare vouchers are only available if you joined an employer scheme and your wages were adjusted on or before 4 October 2018. Up to £55 a week is free of Income Tax and National Insurance; for those who joined from 6 April 2011, the limit is £28 a week for higher-rate and £25 for additional-rate taxpayers (HMRC EIM16053). In 2026/27 that saves about £800.80 a year for a basic-rate taxpayer, £611.52 for a higher-rate and £611.00 for an additional-rate taxpayer, per parent in a scheme. Tax-Free Childcare is worth up to £2,000 per child, but has the £100,000 limit. Once you tell your employer you are getting Tax-Free Childcare (within 90 days of applying) you cannot rejoin the voucher scheme, so compare first with the gov.uk childcare calculator.
Can self-employed parents use Tax-Free Childcare?
Yes. Self-employed earnings count towards the minimum earnings test, and you can use an average of your expected earnings over the tax year if you will not earn enough in the next 3 months. If you started your business less than 12 months ago, there is no minimum. Dividends, interest, property income and pension income do not count towards the minimum earnings, although they do count towards adjusted net income for the £100,000 limit. Company directors may be asked for evidence such as payslips, bank statements or an accountant's statement at application and each reconfirmation.
What if my income is close to the £100,000 limit?
The limit applies to your expected adjusted net income for the whole tax year, so a one-off bonus counts in the year it is paid, whichever 3-month period it falls in. You confirm your details every 3 months, and if you now expect to go over £100,000 for the year you are no longer eligible. Pension contributions reduce adjusted net income: for example, a parent with a £95,000 salary and a £20,000 bonus has £115,000, but sacrificing the bonus into a pension brings it back to £95,000. The same step also restores the Personal Allowance, which is reduced above £100,000.
Which childcare providers can I pay with Tax-Free Childcare?
Only approved childcare that has signed up to the scheme: a registered childminder, nanny, playscheme, nursery or club; a childminder or nanny with a registered childminder agency or childcare agency; a registered school; or a home care worker with a registered home care agency. That covers nurseries, childminders, nannies, breakfast and after-school clubs and holiday clubs. Check with your provider that they are signed up before you apply. Some providers in the European Economic Area may be accepted: HMRC can confirm.
How long can I claim Tax-Free Childcare for each child?
Until the September after your child turns 11. For a disabled child (certified blind or severely sight impaired, or getting Disability Living Allowance, Personal Independence Payment, Armed Forces Independence Payment, or in Scotland Child or Adult Disability Payment) it runs until the September after they turn 16, with the higher £4,000 annual cap. You can also use the extra top-up for a disabled child to help the provider buy specialist equipment.
What evidence should I keep?
Keep the evidence that you meet the work and income tests at each 3-monthly reconfirmation, such as payslips, invoices, bank statements or a statement from your accountant, and the invoices from your childcare provider. HMRC says company directors without regular PAYE records may have to provide this evidence when they first apply and every time they reconfirm.
What other childcare help can I combine with Tax-Free Childcare?
Free childcare hours (see above) can be combined. Universal Credit cannot: it pays back up to 85% of childcare costs, capped at £1,071.09 a month for one child and £1,836.16 for two or more in 2026/27, and you cannot claim it at the same time as Tax-Free Childcare. Childcare vouchers cannot be combined for new vouchers, though vouchers you already hold can be used. A workplace nursery provided by an employer is a separate tax exemption (ITEPA 2003 s.318). Tax-Free Childcare can usually continue while you are on maternity, paternity, shared parental or adoption leave.