Tax-Free Childcare
UK tax glossary · Last reviewed: April 2026
Tax-Free Childcare (TFC) provides a 25% government top-up on childcare payments made through an online account. For every £8 you pay in, HMRC adds £2 — up to £2,000 per year per child (£4,000 for disabled children).
You must be in work and earning between the equivalent of 16 hours/week at the National Living Wage (around £8,580/year) and £100,000 adjusted net income. Both parents in a couple must meet the threshold. The account can be used with registered childminders, nurseries, and afterschool clubs.
TFC cannot be used alongside the Childcare Voucher scheme or childcare element of Universal Credit. Compare carefully — for higher-rate taxpayers, TFC's 25% top-up is less valuable than the effective 40%+ saving from salary-sacrificed Childcare Vouchers where still available.
Worked example
Annual childcare cost: £10,000. Pay £8,000 into TFC account; government tops up £2,000. Total: £10,000 paid to provider. Effective saving: £2,000 (20% of the childcare cost funded by HMRC).
Common questions
Does Tax-Free Childcare affect Universal Credit childcare support?
Yes. You cannot claim Tax-Free Childcare and Universal Credit childcare support in the same period. Universal Credit can cover 85% of childcare costs for eligible claimants, which is usually more valuable for lower-income families.
Can I use Tax-Free Childcare for a nanny?
Yes, if the nanny is registered with Ofsted (or relevant devolved body). A self-employed nanny must register to accept TFC payments.
Related resources
TaxHelper provides general information based on published HMRC rates and guidance. It is not regulated financial or tax advice. For decisions involving significant sums, complex circumstances, or if you are unsure, speak to a qualified accountant or HMRC directly.