Tax-Free Childcare: Get £2,000 Per Child Towards Childcare Costs

Tax-Free Childcare is a UK government scheme where the state tops up your childcare payments by 20%. For every £8 you pay into your Tax-Free Childcare account, the government adds £2. The maximum government contribution is £2,000 per child per year, or £4,000 for disabled children.

That means you can get up to £10,000 of childcare paid for with just £8,000 of your own money.

#How It Works

You open a Tax-Free Childcare account through the government's Childcare Choices website. This account sits between you and your childcare provider.

1. You pay money into your Tax-Free Childcare account
2. The government adds 20% on top (up to £500 per quarter, or £2,000 per year)
3. You pay your childcare provider directly from this account

The account works like a dedicated childcare wallet. Money can only be used to pay registered childcare providers.

#The Money in Numbers

The government contribution is capped at £500 per quarter. If you pay £3,000 in a single quarter, you'll only get £500 that quarter, not £750. Spread your payments across the year to maximise the benefit.

#Who Qualifies

Both parents (or the sole parent in a single-parent household) must meet these requirements:

You must:

• Be in work (employed or self-employed)
• Earn at least the National Minimum Wage for 16 hours per week (currently £183.76 per week for over-21s)
• Earn less than £100,000 per year each

Your child must:

• Be under 12 (or under 17 if disabled)
• Live with you
• Not be in a household receiving Tax Credits, Universal Credit, or childcare vouchers

#The Earnings Floor

The minimum earnings requirement is 16 hours at National Minimum Wage. For the 2024/25 tax year, that's:

• Age 21+: £11.44/hour = £183.04/week = £9,518/year
• Age 18-20: £8.60/hour = £137.60/week = £7,155/year

Self-employed people can count expected earnings. If you've just started a business, you can still qualify based on projected income.

#The £100,000 Ceiling

Each parent must earn under £100,000 per year. If either parent earns £100,000 or more, you can't use Tax-Free Childcare.

This creates an odd cliff edge. A household where both parents earn £99,000 (total £198,000) qualifies. A household where one parent earns £101,000 and the other earns nothing doesn't qualify.

#Exceptions to the Work Requirement

You still qualify if you're not working because:

• You're on parental, maternity, paternity, or adoption leave
• You're on sick leave
• Your partner works and you receive certain benefits (Incapacity Benefit, Severe Disablement Allowance, Carer's Allowance, contribution-based Employment and Support Allowance)

#Tax-Free Childcare vs Other Schemes

#vs Childcare Vouchers (closed to new applicants)

Childcare vouchers closed to new applicants in October 2018. If you're still receiving them, you can continue until your child turns 15 (or 16 if disabled), but you can't use both vouchers and Tax-Free Childcare simultaneously.

Childcare vouchers worked by sacrificing part of your salary before tax, saving you income tax and National Insurance. The maximum saving was around £933 per year per parent for basic rate taxpayers.

Tax-Free Childcare gives you up to £2,000 per child. For most families with one child, Tax-Free Childcare is better. For families where both parents could claim childcare vouchers, the maths is closer.

#vs Universal Credit Childcare Element

Universal Credit can cover up to 85% of childcare costs for eligible families. If you qualify for Universal Credit, that's usually more generous than Tax-Free Childcare's 20%. But you can't receive both.

#vs 30 Hours Free Childcare

The 30 Hours scheme provides 30 hours of free childcare per week during term time for 3 and 4 year olds. You can use Tax-Free Childcare alongside 30 Hours to pay for additional hours, meals, or other costs not covered by the free entitlement.

#What Counts as Eligible Childcare

You can use Tax-Free Childcare to pay for:

• Nurseries and childminders
• Nannies (if Ofsted registered)
• After-school clubs
• Holiday clubs
• Breakfast clubs
• Play schemes

The provider must be registered with Ofsted (England), Care Inspectorate (Scotland), Care Inspectorate Wales, or a Health and Social Care Trust (Northern Ireland).

You cannot use it for:

• Care provided by a relative (grandparent, aunt, etc.)
• Compulsory education (school fees)
• Your own childcare courses
• Foster care payments

#How to Apply

1. Go to childcarechoices.gov.uk
2. Create a Government Gateway account if you don't have one
3. Complete the application (takes about 20 minutes)
4. Provide details of your income, employment, and children
5. Wait for confirmation (usually within a few days)

You'll need to reconfirm your eligibility every 3 months. The government sends reminders, but missing the deadline suspends your account until you reconfirm.

#Common Mistakes

#Forgetting the Quarterly Reconfirmation

You must reconfirm eligibility every 3 months. Miss it and your account freezes. You won't lose the money already in the account, but you can't add more or receive government top-ups until you reconfirm.

Set a recurring calendar reminder.

#Paying Too Much in One Quarter

The government tops up a maximum of £500 per quarter (per child). Paying £10,000 in January means you only get £500 that quarter, not the full £2,000 for the year.

Spread payments evenly: £2,000 per quarter gets you the full £500 top-up each quarter.

#Not Checking Provider Registration

Before paying a provider, check they're registered for Tax-Free Childcare. Not all childcare providers have signed up to the scheme. If your provider isn't registered, you can't pay them from your Tax-Free Childcare account.

#Assuming Vouchers Are Better

If you joined childcare vouchers before October 2018, you might assume they're still the better deal. Run the numbers. For most single-child families, Tax-Free Childcare wins. For families with multiple children, it almost certainly wins.

#What BishBashDosh Shows You

When you model salary changes in BishBashDosh, we show you how Tax-Free Childcare eligibility changes. If you're approaching the £100,000 ceiling, you'll see:

• Whether salary sacrifice could keep you eligible
• The value of Tax-Free Childcare vs the tax savings from higher earnings
• Impact on other means-tested benefits

#Frequently Asked Questions

#Can both parents have a Tax-Free Childcare account?

No. You have one account per child, not per parent. Either parent can make payments into the account.

#What happens to unused money in my account?

It stays there. If you stop using childcare (child starts school, leaves nursery, etc.), you can withdraw the money you paid in. The government top-ups are reclaimed.

#Can I backdate my claim?

No. Tax-Free Childcare only covers payments made after you've signed up. You can't claim back childcare costs from before you had an account.

#Is Tax-Free Childcare taxable?

No. The government contribution is not counted as income. You don't need to declare it on your tax return.

#What if my income changes during the year?

You reconfirm eligibility every 3 months. If your income drops below the minimum or rises above £100,000, update your details. If you become ineligible, you can still use the money already in your account but won't receive further top-ups.

#Can I use it for a nanny?

Yes, but only if the nanny is registered with Ofsted (or the equivalent in Scotland, Wales, or Northern Ireland). Many nannies aren't registered. Check with your nanny and offer to cover registration costs if needed, as the savings easily justify it.