Tax-free childcare

Tax-free childcare is a Government scheme to help eligible working families save on their childcare costs. Eligible working parents and carers can open online childcare accounts - just like an online bank account - to pay registered childcare providers directly.

For every £8 paid into an account, the Government will add £2 (£4 for a disabled child), and the total amount in the account can only be spent on childcare. The maximum that can be paid into an account each year is £8,000 and the maximum that will be received from the Government is £2,000 (£4,000 for disabled children.)

Parents can open an individual account for each child they pay childcare for. For example, if you have three children, you can open three tax-free childcare accounts and deposit up to £8,000 into each.

Only a parent or carer can set up a tax-free childcare account, however money can be deposited into the account by parents, friends, family and employers.

You can apply for tax-free childcare if:

  • Both parents are working (or the sole parent in a lone parent family). You can be employed or self-employed, but if you are self-employed your business must be registered with HMRC
  • Each parent age 25+ earns, on average, at least £120 per week
  • Each parent age 24 or younger earns, on average, at least the equivalent of 16 hours at National Minimum Wage. This works out as:
    • 21-24 years-old: £112.80 a week
    • 18-20 years-old: £89.60 a week
    • Under-18s: £64.80 a week
  • Parents on an apprenticeship (age 19 or under) must earn at least £56 a week
  • All parents must earn less than £100,000 each per year
  • Your child is less than 12 years old, or your child is disabled and less than 17 years old and they're either:
    • Receiving Disability Living Allowance, a Personal Independence Payment or and Armed Forces Independence Payment
    • Severely sight-impaired or blind, confirmed by a consultant ophthalmologist
  • The child you're applying for usually lives with you (you don't have to be their parent)
  • You live and work in the UK, unless you're a Crown servant or member of the HM Armed Forces posted overseas

Please note:

  • You can use income from both your employment and self-employment to meet the minimum income threshold
  • You can average your self-employment income across the year to meet the minimum income criteria.  You need to meet the minimum using just your self-employment income if you take this approach.

You can still apply for tax free childcare if you are:

  • On paid sick leave
  • On ordinary or additional maternity, paternity or adoption leave, or
  • Getting Maternity Allowance, shared parental leave or annual leave
  • Not working, but expect to start a new job in the next 14 days
  • In your first 12 months of self-employment. This is classed as your start-up period and during this time, you don't have to earn the minimum £120 a week to be eligible for Tax-Free Childcare

You may still be able to get tax-free childcare, if you or your partner doesn't work, and the non-working partner gets:

  • Incapacity Benefit or long-term Incapacity Benefit
  • Severe Disablement Allowance
  • Carer's Allowance
  • Contribution-based Employment and Support Allowance
  • National Insurance credits because of incapacity or limited capability for work

You can't apply for Tax-Free Childcare for a child who is:

  • Your foster child
  • Living away from your home for six months or more
  • In a young offenders' institution or secure children's home or training centre
  • Being looked after by a local authority, unless it’s short term respite care

If you're adopting a child, you can apply for tax-free childcare when a court has made an adoption order.

If you apply for tax-free childcare, you won't be able to get:

  • Childcare Vouchers
  • Tax Credits
  • Universal Credit

Parents can check whether tax-free childcare is the best option to save on childcare costs by using the Childcare Calculator or by visiting Childcare Choices

Applications can be made on the HMRC Childcare Service website.

You will need the following to apply:

  • National Insurance number
  • If self-employed, your Unique Taxpayer Reference
  • Personal details, for example UK passport or driving licence number
  • The date you started, or are due to start work
  • Details of any other government support you get

For each child applied for, you should have claimed Child Benefit for them - either now or in the past.

In most cases, you will be told instantly if your application is successful.  If it’s unsuccessful, you will be told why you're not eligible.

If you have a successful application, you will need to reconfirm you're still eligible for tax-free childcare using your Childcare Service account every three months.  It's easy to do: you just tick a box to confirm that your details haven't changed.  You'll be reminded to do this four weeks before the reconfirmation deadline.

You can transfer money into a tax-free childcare account from any bank account.  The Government top up will be added into the tax-free childcare account on the same day, and the total amount will be available to pay for childcare.

You will need to set up your childcare provider as a payee.  You can then arrange regular payments to go to the provider (like a standing order) or one-off payments (like a bank transfer).  The payment should only take two to three working days to arrive in the provider’s bank account.

Providers should have already received a letter with a User ID, inviting them to sign up online at the Childcare Service website.

If a provider hasn’t received this letter, they’ll need to be sent a new one.  They should contact the HMRC helpline on 0300 123 4097.

The provider will need to provide the following information to sign up:

  • Bank account details
  • Ten-digit Unique Taxpayer Reference (UTR). The provider can find their UTR on any HMRC communications.

Further information on tax-free childcare

To find out about other help you might be able to get with childcare costs visit the Childcare Choices website.

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