What is Tax-Free Childcare?
Tax-Free Childcare is a government scheme, run by HM Revenue and Customs (HMRC) through the Childcare Service, that helps working parents with the cost of approved childcare. It was launched in 2017 and replaced employer childcare vouchers for new joiners: vouchers closed to new entrants in October 2018, though parents already in a voucher scheme could stay in it. Tax-Free Childcare is available across the whole United Kingdom — England, Scotland, Wales, and Northern Ireland — unlike funded childcare hours, which are set separately by each nation.
The account at the centre of the scheme
Everything runs through an online childcare account, one account per child. You apply on GOV.UK, usually through your Government Gateway account, and the application takes about 20 minutes. You tell HMRC about yourself, your partner where you have one, and each child you are applying for. HMRC usually tells you immediately whether you are eligible; if extra checks are needed, it can take up to 10 days, and you can contact the Childcare Service helpline if you have heard nothing after 10 days.
Once the account is open, you add your childcare provider by searching for them inside the account by name, town, or postcode. If your provider is already signed up to the scheme, you can pay them straight away. If they are not signed up, you can send them a nudge notification from inside the account asking them to join. You then pay money into the account by Direct Debit, standing order, or bank transfer. Your payment usually appears within one working day, and the government's £2 for every £8 is added at the same time. You pay your provider directly from the account, in whatever pattern your provider invoices: monthly, termly, or as the bill falls due.
What the scheme is worth, and how many people use it
For each child, the top-up is worth up to £500 every three months, or £2,000 a year. For a disabled child, it is up to £1,000 every three months, or £4,000 a year. Those are caps on the government's contribution, not on your childcare bill: to receive the full £500 in a quarter, you must pay £2,000 of your own money into the account in that quarter.
Take-up is large but far from complete. HMRC figures reported by AJ Bell show that 868,095 accounts were used in the whole of 2025/26, against estimates that up to 1.3 million families could be eligible — a gap of more than 400,000 families. HMRC's own December 2025 commentary put monthly use at 543,000 families for 660,000 children in December 2025, down from a peak in spending in July 2024, partly because the expansion of funded childcare hours in England has reduced the amount parents need to pay for themselves. The gap matters for this site's purpose: many eligible families never apply, often because they assume the scheme is only for very low incomes, or because the interaction with other support confuses them. It is not only for very low incomes. Any working family under the £100,000 income cap may qualify, including families on comfortable incomes whose nursery bills are large.
What Tax-Free Childcare is not
It is not a cash payment, not a tax refund, and not a discount applied by your nursery. Your nursery charges its normal fee, and you pay it from an account that contains your money plus the government's top-up. It is also not the same as funded childcare hours: funded hours (for example, 15 or 30 hours a week in England) reduce the hours you pay for, while Tax-Free Childcare reduces the cost of the hours you do pay for. The two can be combined, and many families use both — funded hours for part of the week, and Tax-Free Childcare for extra hours, meals, and extras. The comparison page explains the combinations that are allowed and the ones that are not.
Sources: GOV.UK, Tax-Free Childcare; Best Start in Life, How Tax-Free Childcare works; HMRC, Tax-Free Childcare statistics commentary (December 2025); AJ Bell analysis of HMRC statistics for 2025/26; Childcare Payments Act 2014.