Who can claim Tax-Free Childcare?

Tax-Free Childcare is open to working parents (single or couples) where every working parent earns at least the equivalent of 16 hours a week at the National Minimum Wage or National Living Wage and no parent has adjusted net income over £100,000 in the tax year. The child must be under 12 (under 17 if they have a disability and receive a qualifying benefit such as DLA, PIP or CDP). You cannot also be claiming the Universal Credit childcare element or using Childcare Vouchers - you have to pick the one that works best for your family.

How does the 20% top-up actually work?

You open a Childcare Account on gov.uk for each eligible child. For every £8 you deposit, the government adds £2 - a 20% top-up that mirrors the basic rate of Income Tax. The top-up is capped at £500 per quarter per child (£2,000 a year) or £1,000 per quarter per child (£4,000 a year) for a disabled child. To hit the full £2,000 annual cap a parent needs to spend £10,000 of eligible childcare costs through the account: £8,000 own contribution plus £2,000 top-up. You pay your nursery, childminder or other Ofsted-registered provider directly from the account.

What counts as eligible childcare?

Money in your Childcare Account can only be paid to a childcare provider registered with the relevant inspectorate - Ofsted in England, the Care Inspectorate in Scotland, CIW in Wales or NISCC in Northern Ireland. That covers nurseries, childminders, breakfast and after-school clubs, holiday clubs, school-based wraparound care, and most nannies once they have registered with the voluntary register in their nation. Informal arrangements with relatives are not eligible unless that relative is a registered childminder caring for the child outside the family home.

Can I use Tax-Free Childcare alongside 30 hours free childcare?

Yes. The free hours scheme (15 hours universal plus 15 hours extended for working parents of 3 and 4 year olds, with the 2024-25 expansion bringing under-threes into scope) covers your provider hours; Tax-Free Childcare tops up the costs that fall outside the free entitlement - additional hours, meals, trips and consumables. You apply for both via the single "Childcare Service" account on gov.uk, and reconfirm eligibility every 3 months. You cannot also claim the Universal Credit childcare element or Childcare Vouchers on top of TFC.

Is Tax-Free Childcare or Universal Credit childcare element better?

It depends on the household. Universal Credit pays back 85% of eligible childcare costs (capped at £1,031.88 per month for one child / £1,768.94 for two or more in 2025/26, with monthly uprating policy following CPI), but only if you already qualify for UC on other grounds. Tax-Free Childcare tops up 20% of costs (capped at £2,000 a year per child) and is open up to a £100,000-per-parent income ceiling. As a rough rule, if your household qualifies for UC and your childcare bill is high, the UC element wins; if you earn too much for UC but under £100k each, TFC is your scheme. You cannot run both at once, and switching loses you the alternative.

What about Childcare Vouchers - can I still use those?

Childcare Vouchers closed to new entrants on 4 October 2018 but existing voucher holders can continue to claim under the legacy scheme provided their employer still offers it and they remain in the same employment without an unbroken 12-month gap. Vouchers give basic-rate taxpayers up to £55 per week tax and NIC free; higher-rate £28; additional-rate £25. For most families with eligible childcare above £200 a month, Tax-Free Childcare delivers a larger benefit than vouchers - but the precise crossover depends on tax rate, voucher amount and whether both parents have vouchers. HMRC offers an official comparator on gov.uk; once you switch to TFC the voucher entitlement ends permanently.

What if my income changes during the year?

Tax-Free Childcare eligibility is confirmed every 3 months via the Childcare Account ("reconfirmation"). If your adjusted net income rises above £100,000 in a reconfirmation period, the household becomes ineligible for the rest of that period and the next; HMRC stops the top-ups but you can still spend what is already in the account on registered childcare. If your income drops mid-year and you become eligible again, you reapply at the next reconfirmation point. The £100,000 figure is the same "adjusted net income" used for the Personal Allowance taper - so gross pension contributions and salary sacrifice can keep you under the cap.

What is the quarterly cap and why does it matter?

The £2,000 / £4,000 annual top-up is divided into 4 quarterly caps of £500 / £1,000. The top-up resets at the start of each entitlement period (3 months from the most recent reconfirmation), so unused quarterly allowance does not roll forward. If your childcare bill is heavily weighted to summer holidays (holiday clubs, sports camps), check the gov.uk worked examples - spreading payments across quarters may capture more of the annual top-up than a single lump-sum deposit. The calculator on this page works at the annual level for clarity but the quarterly cap is what HMRC actually enforces day to day.

UK Tax-Free Childcare Calculator 2026/27

Work out the HMRC Tax-Free Childcare top-up. For every £8 you pay into your Childcare Account, the government adds £2 - up to £2,000 a year per child (£4,000 for a disabled child). Both parents must work and earn at least 16 hours at the minimum wage; neither may earn over £100,000. This is general guidance based on the published HMRC scheme - not financial advice. Verify eligibility on the official gov.uk Get Tax-Free Childcare service before relying on a figure.

Worked scenarios for 2026/27

1 child, £5,000 nursery cost, both parents working

£1,000/yr top-up

Net cost £4,000 (you deposit £333/mo)
1 child, £10,000 full-time nursery (cap reached)

£2,000/yr top-up

Net cost £8,000 (you deposit £667/mo)
2 children, £15,000 combined nursery + after-school

£3,000/yr top-up

Net cost £12,000 (you deposit £1,000/mo)
Single parent on £45k, 1 child, £8,000 cost

£1,600/yr top-up

Net cost £6,400 (you deposit £533/mo)
1 disabled child, £18,000 specialist nursery

£3,600/yr top-up

Net cost £14,400 (you deposit £1,200/mo)
One parent earns £105k (ineligible)

Not eligible

Parent income over £100,000 in this entitlement period

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What Tax-Free Childcare is

Tax-Free Childcare (TFC) is a UK government scheme administered by HMRC that helps working parents pay for registered childcare. For every £8 a parent pays into a dedicated online Childcare Account, the government tops the account up by £2 - a 20% bonus, mirroring the basic rate of Income Tax (which is where the name comes from, even though the top-up itself is not delivered through the tax system).

The account holds money ringfenced for childcare. Parents pay nurseries, childminders, after-school clubs, holiday clubs and registered nannies directly from the account; the government top-up is added automatically each time the parent deposits funds, up to the annual cap. Used in full for a regular child, the scheme delivers a £2,000 a year subsidy; for a disabled child the cap doubles to £4,000 a year.

This page provides general guidance only. It is not financial advice and is not a substitute for the official HMRC eligibility check on gov.uk/get-tax-free-childcare. TFC eligibility is reconfirmed every 3 months and your individual circumstances may change the figure - always verify before relying on a number.

How the 20% top-up works in practice

The mechanics are simple in concept and tightly controlled in practice:

Apply for Tax-Free Childcare on gov.uk/get-tax-free-childcare. A separate Childcare Account is opened for each eligible child.
Deposit money into the account from your bank. For every £8 you put in, HMRC adds £2 within a few hours (sometimes minutes), so £80 of your own money becomes £100 in the account.
Pay registered childcare providers directly from the account. Funds in the account can only leave by being paid to a registered provider or refunded back to the parent’s bank account (in which case HMRC also pulls back the corresponding top-up).
Reconfirm eligibility every 3 months. The system sends a reminder 4 weeks before each deadline. A missed reconfirmation suspends new top-ups; existing balance can still be spent on registered childcare.

The £2,000 / £4,000 annual cap is split into 4 quarterly caps of £500 / £1,000. The cap resets at the start of each entitlement period (3 months from the most recent reconfirmation), so unused quarterly headroom does not roll over. If your childcare bill is heavily weighted to school holidays (holiday clubs, sports camps), think carefully about deposit timing - spreading deposits across quarters captures more of the annual cap than a single lump-sum deposit just before a holiday.

Eligibility - the basic rules

A household qualifies for Tax-Free Childcare in any given quarter when all of the following are true:

The child is under 12 (under 17 with a current DLA, PIP, CDP or AFIP award).
The household is working - each parent (or the single parent in a one-parent household) is in paid work earning at least the equivalent of 16 hours a week at the National Minimum Wage or National Living Wage. Self-employed earnings count.
Neither parent has adjusted net income above £100,000 in the tax year. £100,000 exactly is fine; £100,000.01 is not.
The parent and the child are both habitually resident in the UK (with limited exceptions for Crown Servants posted overseas).
Neither parent is receiving the Universal Credit childcare element, the legacy Working Tax Credit childcare element, or Childcare Vouchers for the same child. TFC is mutually exclusive with each of these.

Adjusted net income is the same definition HMRC uses for the Personal Allowance taper (ITEPA 2003 s.58 read with Finance Act 2010): total income less grossed-up Gift Aid donations less gross personal pension contributions. So salary sacrifice, gross workplace pension contributions and Gift Aid all reduce the figure for the £100,000 test. If your salary alone is £105,000 but you sacrifice £8,000 into your workplace pension, your adjusted net income is £97,000 - inside the cap.

Tax-Free Childcare vs the Universal Credit childcare element

Both schemes subsidise the same eligible childcare costs but they work very differently and you can only claim one at a time.

Feature	Tax-Free Childcare	UC childcare element
Subsidy rate	20% (basic-rate equivalent)	85% of actual cost
Annual cap per child	£2,000 (£4,000 disabled)	£12,382 (£1,031.88/mo) for 1 child, £21,227 for 2+
Income ceiling	£100,000 per parent	UC taper applies; depends on full UC entitlement
When you pay	You fund the account up front	UC reimburses costs already paid
Reconfirmation	Every 3 months	Every assessment period (monthly)

A rough decision rule:

If you already get Universal Credit on other grounds (low earnings, LCWRA, large family) and your childcare bill is high relative to your earnings, the UC element wins on subsidy rate - 85% versus 20%.
If you earn too much to qualify for UC but under £100,000 each, TFC is your scheme. There is no income floor for TFC beyond the 16-hours-at-NMW work requirement.
If your situation is borderline UC eligibility, model it both ways. The 55% UC taper bites quickly with childcare costs in the picture, and the UC element only reimburses costs you have already paid in full - which can be a cashflow problem TFC does not have.

You cannot run both schemes at the same time. Switching from one to the other resets the other’s accrued entitlement; there is no mechanism to “split” the year. The Help to Claim service through Citizens Advice can model the choice with your actual figures before you commit.

Tax-Free Childcare vs Childcare Vouchers

Childcare Vouchers are the legacy salary-sacrifice scheme that TFC was designed to replace. They closed to new entrants on 4 October 2018, but existing voucher holders can continue to claim under the legacy scheme provided their employer still offers it and they remain in continuous employment with no break of more than 12 months. Vouchers deliver tax and NIC relief on a fixed weekly amount:

Basic-rate taxpayer: up to £55 per week (£243 / month) tax + NIC free.
Higher-rate taxpayer: up to £28 per week (£124 / month) tax + NIC free.
Additional-rate taxpayer: up to £25 per week (£110 / month) tax + NIC free.

If both parents claim vouchers through their employers, the allowances double up. The maximum saving for a two-earner basic-rate-taxpayer household is roughly £1,866 a year on £6,300 of voucher cost.

For most families with eligible childcare above about £200 a month, Tax-Free Childcare delivers a larger annual saving than vouchers, because TFC scales with actual cost (up to £2,000) whereas vouchers are capped at a fixed weekly amount. But the exact crossover depends on tax rate, both parents’ voucher participation and how much of your eligible childcare exceeds the voucher cap. HMRC offers an official comparator on gov.uk; once you switch to TFC the voucher entitlement ends permanently, so do the comparison carefully before moving.

Interaction with 15 / 30 hours free childcare

Tax-Free Childcare stacks cleanly with the free hours schemes run by the Department for Education in England (and equivalents in Scotland, Wales and Northern Ireland):

15 hours a week universal for all 3 and 4 year olds in England (38 weeks of the year, or stretched across more weeks at fewer hours per week).
30 hours a week extended for working parents of 3 and 4 year olds with both earning at least 16 hours at NMW and neither earning over £100,000 - identical income tests to TFC.
9-month-old and 2-year-old expansion rolling out from April 2024 onward under the Childcare Choices reforms; both parents must be working and under the £100k cap.

The free hours cover provider time directly. TFC then tops up the extras: additional hours beyond the free entitlement, meals, trips, consumables, and any wraparound care like breakfast clubs or holiday clubs. You apply for both via the single “Childcare Service” account on gov.uk and reconfirm both every 3 months together.

You can also use TFC alongside the disability access fund for 3 and 4 year olds with disabilities (a one-off £828 a year payment from the local authority to the provider), and alongside any employer-provided workplace nursery benefit (which is a separate tax exemption under ITEPA 2003 s.318).

Disabled child uplift

If your child has a disability and is receiving Disability Living Allowance (DLA), Personal Independence Payment (PIP), Child Disability Payment (CDP, Scotland) or Armed Forces Independence Payment (AFIP), or is registered blind:

The annual TFC cap doubles from £2,000 to £4,000 per child.
The eligible-spend ceiling doubles from £10,000 to £20,000 - so you can put £16,000 of your own money in and receive £4,000 from HMRC over the year.
The age limit extends from under-12 to under-17.

Disabled children can also use TFC to pay for specialist equipment needed by the registered childcare setting, in addition to the standard fees. The calculator on this page lets you flag disabled children in the household and applies the higher cap automatically.

Quarterly cap and timing

Tax-Free Childcare is administered in 3-month “entitlement periods” that align with each parent’s reconfirmation date. Within each period:

The top-up cap is £500 per regular child (£1,000 disabled).
The cap resets at the start of the next period.
Unused headroom does not roll forward into the next quarter.

In practice this means you cannot save up the full year’s £2,000 top-up for an expensive summer of holiday clubs - you need to spread deposits across at least the four quarters that touch the spending period. The Childcare Account dashboard on gov.uk shows your remaining quarterly headroom in real time; HMRC also emails a reminder a few days before each cap is about to bind.

When to seek advice

Tax-Free Childcare interacts with Universal Credit, Working Tax Credit (legacy), Income Tax (via the £100,000 adjusted net income test), the free hours schemes, employer-provided Childcare Vouchers, workplace nursery benefits, and the disability access fund. None of those interactions are modelled by the simple calculator above. If your situation involves multiple schemes, or you are unsure how salary sacrifice affects your adjusted net income for the £100k test, get specialist advice from:

Citizens Advice - free, independent advice; Help to Claim service for UC choices specifically.
HMRC Childcare Service helpline - 0300 123 4097 for TFC account issues.
Working Families - charity supporting working parents, including childcare cost modelling.
Your employer’s payroll or benefits team - particularly if you currently claim Childcare Vouchers or are considering salary sacrifice to manage your adjusted net income.

See our methodology for sources and update cadence.

Universal Credit Calculator - model the UC childcare element as an alternative.
Salary Calculator - work out the net pay that feeds the household income picture.
Tax Trap Calculator - see how the £100,000 Personal Allowance taper interacts with TFC eligibility.
Salary Sacrifice Calculator - use pension sacrifice to reduce adjusted net income below the £100k cap.
Maternity Pay Calculator - work out SMP entitlement before childcare costs begin.

Frequently asked questions

Who can claim Tax-Free Childcare?: Tax-Free Childcare is open to working parents (single or couples) where every working parent earns at least the equivalent of 16 hours a week at the National Minimum Wage or National Living Wage and no parent has adjusted net income over £100,000 in the tax year. The child must be under 12 (under 17 if they have a disability and receive a qualifying benefit such as DLA, PIP or CDP). You cannot also be claiming the Universal Credit childcare element or using Childcare Vouchers - you have to pick the one that works best for your family.
How does the 20% top-up actually work?: You open a Childcare Account on gov.uk for each eligible child. For every £8 you deposit, the government adds £2 - a 20% top-up that mirrors the basic rate of Income Tax. The top-up is capped at £500 per quarter per child (£2,000 a year) or £1,000 per quarter per child (£4,000 a year) for a disabled child. To hit the full £2,000 annual cap a parent needs to spend £10,000 of eligible childcare costs through the account: £8,000 own contribution plus £2,000 top-up. You pay your nursery, childminder or other Ofsted-registered provider directly from the account.
What counts as eligible childcare?: Money in your Childcare Account can only be paid to a childcare provider registered with the relevant inspectorate - Ofsted in England, the Care Inspectorate in Scotland, CIW in Wales or NISCC in Northern Ireland. That covers nurseries, childminders, breakfast and after-school clubs, holiday clubs, school-based wraparound care, and most nannies once they have registered with the voluntary register in their nation. Informal arrangements with relatives are not eligible unless that relative is a registered childminder caring for the child outside the family home.
Can I use Tax-Free Childcare alongside 30 hours free childcare?: Yes. The free hours scheme (15 hours universal plus 15 hours extended for working parents of 3 and 4 year olds, with the 2024-25 expansion bringing under-threes into scope) covers your provider hours; Tax-Free Childcare tops up the costs that fall outside the free entitlement - additional hours, meals, trips and consumables. You apply for both via the single "Childcare Service" account on gov.uk, and reconfirm eligibility every 3 months. You cannot also claim the Universal Credit childcare element or Childcare Vouchers on top of TFC.
Is Tax-Free Childcare or Universal Credit childcare element better?: It depends on the household. Universal Credit pays back 85% of eligible childcare costs (capped at £1,031.88 per month for one child / £1,768.94 for two or more in 2025/26, with monthly uprating policy following CPI), but only if you already qualify for UC on other grounds. Tax-Free Childcare tops up 20% of costs (capped at £2,000 a year per child) and is open up to a £100,000-per-parent income ceiling. As a rough rule, if your household qualifies for UC and your childcare bill is high, the UC element wins; if you earn too much for UC but under £100k each, TFC is your scheme. You cannot run both at once, and switching loses you the alternative.
What about Childcare Vouchers - can I still use those?: Childcare Vouchers closed to new entrants on 4 October 2018 but existing voucher holders can continue to claim under the legacy scheme provided their employer still offers it and they remain in the same employment without an unbroken 12-month gap. Vouchers give basic-rate taxpayers up to £55 per week tax and NIC free; higher-rate £28; additional-rate £25. For most families with eligible childcare above £200 a month, Tax-Free Childcare delivers a larger benefit than vouchers - but the precise crossover depends on tax rate, voucher amount and whether both parents have vouchers. HMRC offers an official comparator on gov.uk; once you switch to TFC the voucher entitlement ends permanently.
What if my income changes during the year?: Tax-Free Childcare eligibility is confirmed every 3 months via the Childcare Account ("reconfirmation"). If your adjusted net income rises above £100,000 in a reconfirmation period, the household becomes ineligible for the rest of that period and the next; HMRC stops the top-ups but you can still spend what is already in the account on registered childcare. If your income drops mid-year and you become eligible again, you reapply at the next reconfirmation point. The £100,000 figure is the same "adjusted net income" used for the Personal Allowance taper - so gross pension contributions and salary sacrifice can keep you under the cap.
What is the quarterly cap and why does it matter?: The £2,000 / £4,000 annual top-up is divided into 4 quarterly caps of £500 / £1,000. The top-up resets at the start of each entitlement period (3 months from the most recent reconfirmation), so unused quarterly allowance does not roll forward. If your childcare bill is heavily weighted to summer holidays (holiday clubs, sports camps), check the gov.uk worked examples - spreading payments across quarters may capture more of the annual top-up than a single lump-sum deposit. The calculator on this page works at the annual level for clarity but the quarterly cap is what HMRC actually enforces day to day.