The Government scheme could save families up to £2,000 a year on childcare
If you’re a parent, you’ll know childcare is expensive.
The average cost of a full-time nursery place is £263 a week for a child under two, according to charity the National Childbirth Trust, but in some parts of the country it’s even more.
There are a number of childcare schemes to help reduce the cost, such as 15 or 30 free hours depending on your child’s age (which we cover here), and Tax-Free Childcare, that can cut the cost by 20% – saving parents up to £2,000 a year – if you’re eligible.
However, despite being available to 1.3m families, an estimated 400,000 parents are missing out on Tax-Free Childcare, according to figures by investment firm AJ Bell.
Tax-Free Childcare isn’t the easiest scheme to understand or use and there are a few things to be aware of. But the savings are well worth it, so here’s everything you need to know.
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What is Tax-Free Childcare?
Tax-Free Childcare is essentially an account you set up specifically to pay your approved childcare provider. This includes nurseries, nannies, childminders as well as after school and holiday clubs and play schemes.
Once you’ve opened the account, you pay into it directly from your bank account or your debit card.
For every £8 you transfer, you’ll get a £2 top up from the Government. This is paid as soon as your money shows in the account (which could be between two and 24 hours if you pay by bank transfer, the quickest way to pay).
You then add your childcare provider to your account (just search for them by name, Ofsted reference, location or postcode) and pay them directly.
The key thing here is the provider must be ‘approved’. This means they must be registered, as well as signed up to the Tax-Free Childcare scheme. I’ll explain more about how to check if your provider’s registered below.
How much do I get?
It’s effectively a 20% top up on what you pay into your account. So, if you transfer £200, you’ll end up with £250.
However, it’s capped at £500 every three months. So to get the maximum bonus, you’d need to pay in £2,000 every quarter. But if you don’t use your allowance in the three month period, you can’t roll it over to the next one.
If you’ve got a disabled child you can claim up to £1,000 every three months, or £4,000 a year.
If you’re not sure how much to pay in to cover your nursery or childcare costs, you can try an online calculator like this one.
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Who can get Tax-Free Childcare?
There are a number of criteria for Tax-Free Childcare.
You should be eligible if you and your partner, if you’ve got one, are in work (either employed or self-employed). You can also usually get it if you’re on sick leave, annual leave, maternity or paternity leave, shared parental leave, adoption leave, statutory neonatal care pay or bereaved partner’s paternity leave.
If you’re not working, you might still be able to claim if your partner is working and you get Incapacity Benefit, Severe Disablement Allowance, Carer’s Allowance or (in Scotland only) Carer Support Payment, contribution-based Employment and Support Allowance.
You must be at least 16 years old, live in the UK and be responsible for the child you’re applying for. You’ll need to have a National Insurance number and be a British or Irish citizen.
You need to earn the equivalent of the National Minimum Wage or Living Wage for 16 hours a week over three months. So if you’re 21 and over, this would be £203.36 a week or £2,643.68 before tax over three months.
The exception here is if you’re self-employed and started your business less than 12 months ago. It doesn’t matter how little you earn in this case – you can still be eligible for Tax-Free Childcare.
You won’t be eligible for Tax-Free Childcare if you or your partner have a total taxable income (including any foreign income) of over £100,000 for the current tax year. You also won’t be able to get it if your child doesn’t usually live with you or you or your partner get a childcare bursary or grant, universal credit or childcare vouchers. You also can’t claim it for foster children.
Is there anything else I need to do?
A quirk of the scheme (which is also a bit of an administrative headache) is that you need to sign into your account every three months and confirm your details are up to date. If you don’t, you stop getting the 20% top up and your account becomes ‘pay only’.
When can I claim?
You can apply anytime unless you’re starting or restarting work, for example after maternity or paternity leave.
In this case, the date you can claim Tax-Free Childcare depends on when you go back to work. For example, if you’re returning to work between May 1 and September 30 this year, you can apply from April 1.
If you’re going back between October 1 and January 31 next year, you can claim from September 1. And if you’re not returning until February 1 to April 30 2026, you can apply from January 1 next year.
I’ve put the dates in a box below, to make it easier.
| Returning to work | When to apply |
| Between May 1 to September 30 | From April 1 |
| Between October 1 to January 31 | From September 1 |
| Between February 1 to April 30 | From January 1 |
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- Switch bonus£180
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- FSCS Protected? Yes
- Switch bonus requirements Switch using the Current Account Switch Service and close your old account within 60 days of starting the switch
- Deposit requirements Deposit £1,500 in the first 60 days from opening the account
- Direct debits transferred over Set up two Direct Debits before or after the switch from a selected list of household bills
- Existing customers? Can't have held any Santander current account on 1 January 2025
- Restrictions Can't have received a switching bonus from Santander already, offer limited to once per person
- Eligible accounts Open a new or hold an existing Everyday, Edge, Edge Up or Edge Explorer current account
When does Tax-Free Childcare stop?
You can get the bonus for your child until September 1 after they turn 11 years old, or until September 1 after their 16th birthday if they’re disabled.
Can I use Tax-Free Childcare with my free hours?
Yes you can – if you’re eligible you can use both schemes at the same time.
How do I know if my childcare providers’ registered?
Before you apply for Tax-Free Childcare, it’s best to check your provider is approved and signed up to the initiative.
How you check will depend on where you live.
For example, if you’re in England, you can look at Ofsted or the list of registered childminder and childcare agencies.
Welsh residents can search the Care Service Directory and if you live in Scotland, you can use the Scottish Care Inspectorate. There’s a similar register for Northern Ireland, too.
What if I’m on Universal Credit?
If you’re on Universal Credit, you can get 85% of childcare costs covered – but you can’t use Tax-Free Childcare. It’s tricky to work out what’s better but the Government childcare calculator could give you some guidance.
How do I set up a Tax-Free Childcare account?
You can apply via the Government website – it’s pretty straight forward and takes about 20 minutes.
You’ll need yours and your partner’s National Insurance number, your Unique Taxpayer Reference if you’re self-employed, plus your child’s UK birth certificate number and the approximate date you’re due back at work.
If you’re a Company Director you’ll need to prove you meet the minimum income threshold with a bank statement, wage slips or invoices.
