Tax-Free Childcare: how the government top-up works

Tax-Free Childcare is a government scheme that pays working parents a 25% top-up on what they spend on childcare. For every £8 you pay into an online childcare account, the government adds £2, so a £250 nursery bill costs you £200 once the government's £50 contribution is added¹. The top-up is capped at £500 every three months for each child, up to £2,000 a year, or £1,000 every three months and up to £4,000 a year if your child is disabled¹.

The scheme is run by HMRC and is UK-wide. You open an account online for each child, pay money in by Direct Debit, standing order or bank transfer, and use the balance to pay your childcare provider direct from the account¹. Around 75,000 childcare settings now accept Tax-Free Childcare as payment, and HMRC reported in August 2026 that families using the scheme saved an average of almost £100 a month².

Despite that, take-up is far from complete. HMRC estimates that around 800,000 families are missing out, and only about half of all Tax-Free Childcare accounts are being used each month³. This page explains how the top-up works, who qualifies, what the earnings rules are, how the three-monthly reconfirmation keeps the money coming, and how the scheme compares with Universal Credit childcare help and the closed childcare vouchers scheme.

How Tax-Free Childcare works: £2 for every £8 you pay in

The mechanics are simple. You open an online childcare account for a child, pay your own money in, and the government adds £2 for every £8 you contribute, at the same time your payment lands¹. The combined balance is then used to pay your childcare provider direct from the account⁶. Because the government's share is 20% of the total childcare cost, the scheme is the equivalent of getting back the tax paid at the basic rate of 20%⁷, and most people save 20p for every £1 of childcare⁷.

The official worked example shows how the split falls:

The money is not a loan and there is no claim to make at the end of the year: the top-up is added as you pay in, and it is spent on childcare through the account. Payments you make usually appear in the account within one working day, and the government's contribution is added at the same time¹.

One point worth knowing is that other people can help fund the account. Grandparents, family members and even friends can pay into a Tax-Free Childcare account directly, which can help a family reach the level of paying in needed to receive the full quarterly top-up³. The cap on the government's contribution is unchanged whoever pays the money in.

How much you can get: up to £2,000 a year per child, £4,000 if disabled

The headline figures are per child, not per family. The total top-up you can get for each child is £500 every 3 months, up to £2,000 a year¹. If your child is disabled, this rises to £1,000 every 3 months, up to £4,000 a year¹. To reach the full £2,000, a family needs to pay out at least £8,000 on eligible childcare in the year, since the government's share is one quarter of what the parents spend⁸.

There is no limit on the number of children that can be included: you open a separate account for each child, and each has its own cap⁴. Families can open an account for each of their children aged up to 11 and, if they have a disabled child, aged up to 16².

For a disabled child, the extra money can be used for more hours of childcare, or to help pay your childcare provider so they can get specialist equipment for your child, such as mobility aids¹. The disabled-child rate runs for longer as well: a disabled child can receive up to £4,000 a year until the 1 September after their 16th birthday².

The age rules are where the guidance documents differ slightly in wording. GOV.UK states the scheme is for children who are 11 or younger, or 16 or younger if they are disabled, with eligibility ending on the 1 September following the relevant birthday¹. Some independent guidance describes the limit as children under 12, or under 17 if they have a disability⁹. The dates work out the same in practice: a child qualifies until the 1 September after their 11th birthday, or after their 16th birthday if they are disabled⁴. Where a child receives Disability Living Allowance, Personal Independence Payment or Armed Forces Independence Payment, or is sight impaired, the scheme can continue until the child turns 17⁶.

Earnings rules: the minimum income and the £100,000 limit

Eligibility rests on both parents (or a single parent) being in work and within an income band. You and your partner, if you have one, must each expect to earn at least the National Minimum Wage or Living Wage for 16 hours a week, and neither of you can expect to earn over £100,000 a year⁵. The £100,000 limit is one of the sharp edges in the UK tax system: families can face a cliff edge if either parent's income exceeds £100,000, because eligibility is lost altogether rather than tapered away¹¹. The threshold is measured on expected adjusted net income, the same measure used for related rules such as losing your Personal Allowance above £100,000.

The minimum income is expressed as expected earnings over the next three months, and the exact figure depends on your age:

There are important exceptions to the "must be working" rule:

• You can still be eligible if you are off work on annual leave, off sick, or you have had a baby⁶.
• If you are not working, you can only apply if you are due to restart work in the next 31 days⁸.
• If one partner is working and the other receives Incapacity Benefit, Severe Disablement Allowance, Carer's Allowance or Employment and Support Allowance, you may still qualify³.
• In Scotland, having underlying entitlement to the Carer Support Payment counts as being in qualifying paid work for access to Tax-Free Childcare¹².
• Foster children are not eligible for Tax-Free Childcare¹³.

For the self-employed, the first year is treated specially. If you are self-employed and started your business less than 12 months ago, the earnings limit does not apply to you⁸. This recognises that a new business may not yet have reached a steady income. After the first 12 months, the usual minimum income rules apply again.

Paying in, paying providers and taking money out

Once you have a childcare account, you can pay money in by Direct Debit, standing order or bank transfer¹. Your payment usually appears in the account within one working day, and the government's top-up is added at the same time¹. Your childcare provider is then paid direct from the account⁶.

The provider must be signed up to the Tax-Free Childcare scheme: you can only get support if your childcare provider is registered with the scheme⁵. Almost 75,000 providers are now signed up to receive Tax-Free Childcare payments². Eligible providers include:

• a registered childminder, nanny, playscheme, nursery or club
• a childminder or nanny with a registered childminder agency or childcare agency
• a registered school
• a home care worker working for a registered home care agency¹

The scheme covers the costs families actually face: a registered childminder, nanny, playscheme, nursery or club, a childminder or nanny with a registered childminder agency or childcare agency, a registered school, or a home care worker working for a registered home care agency¹. Payments go straight to the provider: the childcare provider is paid direct from the online account². Tax-Free Childcare can also be used to pay a provider based in a European Economic Area (EEA) country, and HMRC can be contacted to check a particular provider¹.

Money you pay in but do not spend is not trapped. Unused money can be withdrawn at any time². When money is withdrawn, the government's contribution is not kept, so only your own payments come back to you. This makes the account flexible for families whose childcare costs rise and fall with school holidays.

Reconfirming every 3 months to keep the top-up

The top-up arrives in three-month entitlement periods, and each period has to be confirmed. You must sign in to your childcare account every 3 months to confirm you are still eligible. If you do not, your Tax-Free Childcare will stop¹. The same reconfirmation applies to the linked free childcare hours: you must sign in every 3 months to confirm your details are up to date¹⁴.

The reconfirmation is a light-touch check rather than a new application: you are confirming that your circumstances have not changed, not supplying evidence again. But it is easy to miss, and the consequence is blunt, because the government's contributions stop until you sign back in and reconfirm. Setting a reminder every three months is the practical safeguard.

Separately from reconfirmation, changes in circumstances can end eligibility before the three months are up. Eligibility ends on the 1 September following your child's 11th birthday, or the 1 September after their 16th birthday if they are disabled⁵. If your income rises above £100,000, or you stop working without a qualifying exception, the entitlement ends as well⁴.

Tax-Free Childcare, Universal Credit or childcare vouchers: choosing one

You cannot mix this help with other childcare support. You cannot get Tax-Free Childcare at the same time as Working Tax Credit, Child Tax Credit or childcare vouchers¹⁵. Parents cannot use Tax-Free Childcare at the same time as receiving childcare vouchers from an employer or Universal Credit⁹. If you claim Universal Credit, you cannot open a Tax-Free Childcare account until you close your Universal Credit claim¹⁶.

The stakes are high if you choose wrongly. If you apply for and are awarded Tax-Free Childcare, your Universal Credit or tax credit award will be terminated, and this means all elements of the award, not just the childcare element⁴. For tax credits claimants, the Working Tax Credit and Child Tax Credit awards are terminated, not just the childcare element⁴. The tax credit service has since shut down altogether, with remaining accounts closed in February 2026, so this termination rule now mainly matters for Universal Credit.

Which is better depends on your income:

• Most people who are entitled to Universal Credit will be better off getting help with their childcare costs through Universal Credit rather than through Tax-Free Childcare¹⁷.
• Families getting only a small amount of Universal Credit might in some cases be better off with Tax-Free Childcare⁷.
• Universal Credit can reimburse up to 85% of childcare costs for eligible claimants, against the 20% (a quarter of what you pay in) from Tax-Free Childcare¹⁸.

Childcare vouchers are a closed chapter. They were a salary sacrifice scheme which has been replaced by Tax-Free Childcare and is no longer open to new applicants¹⁹. You can only get childcare vouchers if you have already joined a scheme¹⁴. If you are already getting help with childcare costs through childcare vouchers, you can carry on getting it¹⁷. Vouchers let you take up to £55 a week of your wages, worth around £930 a year to a basic-rate taxpayer, £624 to a higher-rate taxpayer and £590 to a top-rate taxpayer¹³. Vouchers run to children aged 15 or under, and are not available to anyone who is self-employed¹³. You cannot continue to claim vouchers if you take a career break for longer than a year¹³.

The one-way door matters here. Once you make a claim for Tax-Free Childcare, you cannot go back to the voucher scheme²⁰. You will be able to switch back if claiming Tax-Free Childcare was not the right choice for you or your circumstances later change, but that switching is between Tax-Free Childcare and Universal Credit, not back to vouchers⁴.

Using it alongside the free childcare hours

Tax-Free Childcare and the funded childcare hours are separate schemes that work together. Tax-Free Childcare can be used alongside the government funded childcare hours, subject to eligibility². The funded hours cover a set number of free hours per week, while Tax-Free Childcare tops up whatever you pay above that, for example additional hours at a nursery, or breakfast and holiday clubs.

The funded entitlements differ across the UK. In England, working parents may be able to get 30 hours of free childcare a week¹⁴, and from September 2025 working parents with children under 5 are entitled to 30 free hours a week²¹. In Scotland, the entitlement is 30 hours per week of free childcare if used only during term time, or 22 hours per week if used throughout the year²². Parents who are not working can still get 15 hours a week during term time for three and four-year-olds²¹, and two-year-olds may get 15 hours in England if the family receives a qualifying benefit¹³. Northern Ireland has its own arrangements, with help paying for approved childcare set out by nidirect alongside the UK-wide Tax-Free Childcare scheme⁵.

The earnings rules for the funded hours mirror the Tax-Free Childcare rules in England: neither parent can earn more than £100,000 a year, and you must use a registered childcare provider³. The same application covers both. When you apply for Free Childcare for Working Parents, HMRC checks whether you are eligible for Tax-Free Childcare at the same time, and if your application is approved you get an 11-digit code that proves you are eligible for the free hours¹⁴.

How to apply and where to get help

Applying is done online. To apply for Tax-Free Childcare, you apply through GOV.UK, and for the linked free childcare hours you set up a childcare account through the Free Childcare for Working Parents service⁵. HMRC checks your eligibility when you apply¹⁴. People can visit GOV.UK to check eligibility and sign up².

The application asks for details of you, any partner, and your children, including National Insurance numbers and expected income. Once the account is open, the practical steps are:

1. Pay money into the account by Direct Debit, standing order or bank transfer¹.
2. Check your childcare provider is signed up to the scheme, and ask them to sign up if not⁵.
3. Pay your provider from the account as bills fall due⁶.
4. Sign in every 3 months to reconfirm your eligibility¹.

If you cannot use the online service, the regulations provide exceptions. The electronic communications requirement does not apply where a person is prevented by a court order, holds incompatible beliefs, is unable by reason of age, disability, inability to operate a computer or living in a remote location, or is prevented by a technical failure at HMRC lasting at least 7 days¹. HMRC can also make a compensatory payment in circumstances where a top-up payment cannot be received, including where a childcare account is subject to an account restriction order because another person wants to apply for 30 hours free childcare¹.

Free, impartial help is available before you commit to a route. HMRC's guidance on checking what financial help you can get sets out the schemes in one place²³. Entitledto and Turn2us offer free benefits calculators that compare Tax-Free Childcare with Universal Credit childcare help for your own circumstances⁴. Maternity Action publishes advice on money for parents and babies, including how maternity leave interacts with childcare support⁹, and Turn2us explains that if you get Maternity Allowance and Universal Credit together, you can keep getting help with childcare costs for your older children while on maternity leave²⁴. In Northern Ireland, Law Centre NI's cost of living guidance for parents covers the help available²⁰. For the wider picture of how tax credits ended and what replaced them, see tax credits, and for how income above £100,000 affects your tax more generally, see losing your Personal Allowance above £100,000 and the personal tax guide.