UK Tax-Free Childcare 2026/27: How It Works in Practice
Tax-Free Childcare 2026/27: the 20% top-up up to £2,000 a child, the £100,000 income limit, earnings test, 3-month reconfirmation and UC.
Tax-Free Childcare is a UK-wide scheme run by HMRC. You pay into an online childcare account, the government adds 20% of the bill, and you pay an approved provider from the account. This guide covers the £100,000 income limit and how pension and Gift Aid change it, the earnings test, reconfirmation, the choice against Universal Credit, and how it sits with free hours in England.
2026/27 Tax-Free Childcare at a glance
Top-up per child per year
£2,000
£4,000 for a disabled child
Top-up rate
20%
of the bill: £8 from you + £2 added
Income limit
£100,000
Adjusted net income, each parent; a cliff, not a taper
Reconfirm
Every 3 months
Or the top-ups stop
Figures from GOV.UK Tax-Free Childcare. Children qualify until the September after they turn 11 (16 if disabled).
Minimum earnings over the next 3 months (2026/27)
Each parent must expect to earn at least 16 hours a week at their minimum wage rate over the next 3 months (per GOV.UK eligibility):
- Aged 21 or over: £2,643.68
- Aged 18 to 20: £2,256.80
- Under 18 or an apprentice: £1,664.00
If your income is irregular or you are self-employed, you can use an average of what you expect to earn over the tax year. If your business started less than 12 months ago, there is no minimum. Dividends, interest, property income and pension income do not count.
The £100,000 limit: what brings adjusted net income down
Adjusted net income is taxable income less certain reliefs. Pension salary sacrifice lowers taxable pay directly. Personal pension contributions under relief at source and Gift Aid donations reduce it by the grossed-up amount: £1.25 for every £1 paid (per GOV.UK adjusted net income). ISA saving does not reduce it.
| Scenario | Salary + bonus | Salary sacrifice | Personal pension (gross) | Gift Aid (gross) | Adjusted net income | Tax-Free Childcare |
|---|---|---|---|---|---|---|
| No action | £105,000 | - | - | - | £105,000 | Not eligible |
| Pension salary sacrifice | £105,000 | £6,000 | - | - | £99,000 | Eligible |
| Bonus, Gift Aid only | £110,000 | - | - | £5,000 (£4,000 given) | £105,000 | Not eligible |
| Personal pension plus Gift Aid | £110,000 | - | £8,000 (£6,400 paid) | £3,000 (£2,400 given) | £99,000 | Eligible |
The same adjusted net income drives the Personal Allowance taper, which removes £1 of allowance for every £2 between £100,000 and £125,140, and the High Income Child Benefit Charge, which runs from £60,000 to £80,000 (per GOV.UK). Child Benefit is £27.05 a week for the eldest child and £17.90 for each other child in 2026/27; above £80,000 the charge equals the whole of it.
Tax-Free Childcare or the Universal Credit childcare element
You cannot have both at once. The table shows the most each scheme can put towards a given annual bill in 2026/27: Tax-Free Childcare at 20% up to £2,000 a child, and the UC childcare element at 85% up to £1,071.09 a month for one child or £1,836.16 for two or more.
| Children | Annual childcare bill | Tax-Free Childcare top-up | UC childcare element (maximum) |
|---|---|---|---|
| 1 | £6,000 | £1,200 | £5,100 |
| 1 | £12,000 | £2,000 | £10,200 |
| 2 | £15,000 | £3,000 | £12,750 |
| 2 | £24,000 | £4,000 | £20,400 |
The UC column is a ceiling, not a payment. The childcare element is added to the UC award, and the whole award is reduced as earnings rise, so a household earning enough to lose its UC award gets none of it. Use the GOV.UK childcare calculator to compare the two for your own figures, and do not cancel UC until your Tax-Free Childcare application has been decided. UC rates: DWP Benefit and pension rates 2026 to 2027.
Getting and keeping the account
- Step 1
Check your provider is signed up
Your childcare provider must be signed up to Tax-Free Childcare. Check with them before you apply.
- Step 2
Apply online
Apply on GOV.UK with your National Insurance number (and your partner's), plus your UTR if self-employed. It usually takes 20 minutes. You usually find out at once, or within 10 days if extra checks are needed.
- Step 3
Pay into the childcare account
Pay in by Direct Debit, standing order or bank transfer. For every £8 you pay in, the government adds £2. Both usually appear within one working day.
- Step 4
Pay your provider
Pay your approved childcare provider from the account.
- Step 5
Reconfirm every 3 months
Sign in every 3 months to confirm your details are up to date. If you do not, your Tax-Free Childcare stops.
Approved providers include registered childminders, nannies, playschemes, nurseries and clubs, childminders or nannies with a registered agency, registered schools, and home care workers with a registered agency. The account can also pay for extras such as meals, nappies and trips where the provider supplies them. The rules are in the Childcare Payments Act 2014 and the Childcare Payments (Eligibility) Regulations 2015.
Related guides
Frequently asked questions
How much does the government add to a Tax-Free Childcare account?
For every £8 you pay in, the government adds £2, which is 20% of the childcare 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. Reaching the £2,000 cap takes £10,000 of childcare a year.
What is the £100,000 limit for Tax-Free Childcare?
You cannot claim if you or your partner expect adjusted net income over £100,000 for the current tax year. It is a cliff, not a taper: one parent going over removes the top-up for the whole household. Adjusted net income is reduced by pension salary sacrifice (which lowers taxable pay), by grossed-up personal pension contributions and by grossed-up Gift Aid donations.
How much do I need to earn to get Tax-Free Childcare?
You, and your partner if you have one, must each expect to earn at least the National Minimum Wage or National Living Wage for 16 hours a week over the next 3 months: £2,643.68 if you are 21 or over, £2,256.80 if 18 to 20, and £1,664.00 if under 18 or an apprentice. Self-employed people who started less than 12 months ago do not have to meet it. Dividends, interest, property income and pension income do not count towards it.
How often do I have to reconfirm Tax-Free Childcare?
You must sign in to your childcare account every 3 months to confirm your details are up to date. If you do not, your Tax-Free Childcare stops. The same reconfirmation keeps a Free Childcare for Working Parents code valid in England.
Can I get Tax-Free Childcare and Universal Credit at the same time?
No. You cannot get Tax-Free Childcare while claiming Universal Credit or childcare vouchers. The UC childcare costs element pays back up to 85% of childcare costs, up to £1,071.09 a month for one child or £1,836.16 for two or more in 2026/27, but it is part of the UC award and is reduced by the earnings taper. GOV.UK says to wait for a decision on a Tax-Free Childcare application before cancelling Universal Credit.
What are the rules for a disabled child?
A disabled child stays eligible until the September after they turn 16 (11 for other children), and the top-up cap doubles to £4,000 a year, reached on £20,000 of childcare. The child must be certified as blind or severely sight-impaired, or get Disability Living Allowance, Personal Independence Payment, Armed Forces Independence Payment, or in Scotland Child Disability Payment or Adult Disability Payment.
Can I keep Tax-Free Childcare on maternity leave?
Usually yes. GOV.UK lists maternity, paternity, shared parental and adoption leave, statutory neonatal care pay and bereaved partner's paternity leave as situations where you can usually still get Tax-Free Childcare, as well as sick leave and annual leave.
How does Tax-Free Childcare work for company directors?
HMRC tries to check the minimum income using your PAYE records. If you do not submit regular PAYE information, you may need to show evidence such as wage slips, bank statements, a statement from your accountant or invoices, when you apply and each time you reconfirm. Dividends do not count towards the minimum earnings test, but they do count towards adjusted net income for the income limit.
What happens if we separate?
You and your partner cannot both have accounts for the same child. If you are separated and jointly responsible for the child, you need to decide who applies; if you cannot, both apply and HMRC decides who gets the childcare account.
Can I use Tax-Free Childcare with 30 hours free childcare?
In England, yes. Free Childcare for Working Parents gives 30 hours a week for 38 weeks of the year for children aged 9 months to 4 years, with the same earnings and income tests. One application checks both, and Tax-Free Childcare can pay for hours and extras above the free entitlement. Scotland, Wales and Northern Ireland run different schemes.