Newly released Tax-Free Childcare statistics from HM Revenue and Customs (HMRC) show a general rise in participation in the scheme during the 2024–25 financial year. Yet many eligible families may not be fully accessing the benefits of this government scheme, which can cut childcare costs by as much as £2,000 per child (£4,000 per disabled child) annually.
How Tax-Free Childcare works
For every £8 a parent pays into their Tax-Free Childcare account the government will add an extra £2, up to a maximum of £2,000 per child per year. For disabled children the maximum is £4,000 per year.
- Accounts are fully online for most users;
- Parents can pay into and make payments to childcare providers out of the same account; and
- Parents are able to withdraw money for other purposes but lose the government top-up on anything removed.
Childcare providers need to be signed up to Tax-Free Childcare before a family can make payments to them.
Eligibility criteria
In order to qualify for Tax-Free Childcare, you or your partner (if you have one) need to earn at least the National Minimum Wage or National Living Wage for 16 hours a week.
Do note, the scheme is available to families where one or more parent is self-employed. For information on how to calculate income if you are self-employed click here.
Your child must be :
- Aged 11 or under. Eligibility ends on 1 September after they turn 11. For children with a disability, eligibility continues until the 1 September after they turn 16.
You will not be eligible if :
- Either you or your partner earn over £100,000 per annum; or
- Your family receives universal credits or childcare vouchers.
It is worth looking at the eligibility rules if you do not meet the above conditions, in case you meet any of the exceptions.
Supporting employees through Tax-Free Childcare
For employers, raising awareness of the Tax-Free Childcare scheme could help ease the financial pressure of childcare for their employees. The scheme can also play a key role in helping parents return to work following parental leave – supporting the retention of talented and experienced team members.
