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.

£40,000 Annual Childcare Cost: UK Tax-Free Childcare 2026/27

A working family with one eligible child paying £40,000 a year for registered nursery, childminder or after-school care, where both parents earn under £100,000 and over 16 hours at minimum wage, receives £2,000 a year from HMRC as a 20% Tax-Free Childcare top-up, bringing the net cost to £38,000 a year (£3,167 a month). With two children at the same total bill the top-up rises to £4,000 because each child has its own £2,000 cap. At this spend the single-child cap is fully used - any extra spend above the £10,000 eligible threshold is paid in full by the parent. This is general guidance based on the published HMRC scheme - verify on gov.uk Get Tax-Free Childcare.

1 child, both parents working

£2,000/yr

Net cost £38,000 after top-up

Monthly deposit you make

£3,167/mo

HMRC adds 20% on top as you deposit

Annual saving from TFC

£2,000

Equivalent to a 20% discount on eligible spend up to the cap

How the top-up is calculated on £40,000 of childcare

Confirm both parents earn at least 16 hours a week at the National Minimum Wage / National Living Wage and that neither has adjusted net income above £100,000 for the year. At £40,000 of childcare with both parents earning under £100,000, the household is eligible for the current 3-month entitlement period.
Identify the eligible spend cap. Each regular child has a £10,000 a year eligible-spend ceiling that attracts the full £2,000 top-up; a disabled child has a £20,000 ceiling that attracts £4,000.
Apply the 20% top-up to eligible spend. On £40,000 for one regular child, the eligible portion is £10,000 and the top-up is £2,000.
Net cost to the parent: £40,000 less the top-up = £38,000 a year (£3,167 a month).
Deposit cadence: pay £3,167 a month into the Childcare Account on gov.uk; HMRC adds the top-up within hours. Pay your registered childcare provider directly from the account. Reconfirm eligibility every 3 months.

Four household profiles at £40,000/yr

Annual top-up by household type at this cost level. Both parents assumed under £100,000; reconfirm every 3 months on the main calculator.

Household	Top-up	Net cost	Monthly deposit
1 child	£2,000	£38,000	£3,167
2 children	£4,000	£36,000	£3,000
1 disabled child	£4,000	£36,000	£3,000
Single parent, 1 child	£2,000	£38,000	£3,167

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Related calculators

Tax-Free Childcare calculator - adjust children, incomes and cost to model your own household.
Universal Credit calculator - model the UC childcare element as the alternative scheme.
60% tax trap calculator - the £100,000 boundary that decides TFC eligibility.
Salary sacrifice calculator - reduce adjusted net income below £100k via pension sacrifice.

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.