Tax-Free Childcare: how the £2 top-up works and who can use it
Published · 3 min read · Figures checked . UK rules and rates change, so check the official sources below before you act.
Tax-Free Childcare adds £2 from the government for every £8 a parent pays in towards approved childcare. This guide explains the limits, who can join, who cannot, and the three-monthly check.
What Tax-Free Childcare is
Tax-Free Childcare is a government scheme that helps working parents with the cost of childcare. A parent opens an online childcare account and pays money into it. The government then adds a top-up. The money in the account is used to pay approved childcare providers.
For every £8 a parent pays in, the government adds £2. Put another way, the government pays 20% of the total bill, and the parent pays the other 80%.
What it can pay for
The provider must be signed up to the scheme and be approved childcare. GOV.UK lists examples such as a registered childminder, nanny, nursery, play scheme or club, and a registered school. Breakfast clubs, after-school clubs and holiday clubs can count. It is worth asking a provider whether it is signed up before applying.
Money goes in by Direct Debit, standing order or bank transfer. GOV.UK says payments usually show in the account within one working day, and the top-up is added at the same time.
Which children count
- The child must usually live with the parent.
- A child is eligible until the September after they turn 11.
- A disabled child is eligible until the September after they turn 16. They must be certified blind or severely sight-impaired, or get a qualifying disability payment such as DLA or PIP. In Scotland, Child Disability Payment or Adult Disability Payment can also count.
Who can use it
GOV.UK says parents can usually qualify if they, and their partner if they have one, are in work. That includes employed and self-employed people, and people on sick leave, annual leave, or parental leave such as maternity, paternity, shared parental or adoption leave.
There is a minimum income test. Each parent needs to expect to earn at least a set amount over the next 3 months. These amounts equal 16 hours a week at the National Minimum Wage or Living Wage.
There is also an upper limit. A parent cannot claim if they or their partner expect adjusted net income over £100,000 in the current tax year.
Who it does not apply to
- People who claim Universal Credit. GOV.UK says Tax-Free Childcare cannot be received alongside it.
- People who get childcare vouchers. Vouchers are only open to people who joined an employer scheme already.
- People who get a childcare bursary or grant.
- People who foster the child.
Immigration rules also apply. A parent needs a National Insurance number and, for example, British or Irish citizenship, settled or pre-settled status, or permission to access public funds.
Keeping the account open
Parents must sign in to their childcare account every 3 months to confirm they are still eligible. GOV.UK says that if this is missed, Tax-Free Childcare stops. The account shows when the next check is due.
Differences across the UK
Tax-Free Childcare is a UK-wide HMRC scheme, but some details vary. Care from a relative only counts in Scotland and Wales if the relative is a registered childminder who looks after the child outside the child's home. In Northern Ireland, a relative must be in the Northern Ireland childcare approval scheme, care for the child outside the home, and care for at least one unrelated child. Free childcare hours for younger children are separate schemes that work differently in each nation.
Check before you act
Rules and rates change, and your own situation may differ. It can be worth confirming the details on the official pages linked below before applying or changing any childcare arrangements. Free help is available from Citizens Advice.
Sources
For information only. See our disclaimer and editorial standards. Spotted an error? Tell us.
