What is Tax-Free Childcare?

Tax-Free Childcare (TFC) is a government-funded scheme administered by HMRC that helps eligible working parents pay for registered childcare. For every 80p a parent deposits into their online childcare account, the government adds 20p — effectively a 25% top-up on the amount the parent contributes, equivalent to basic-rate tax relief.

The maximum government contribution is £2,000 per child per year (or £4,000 per year for disabled children). Parents can receive up to £500 per quarter per child (£1,000 for disabled children).

To qualify, both parents in a couple must be working (or the sole parent in a single-parent household), each earning at least the equivalent of 16 hours per week at the National Living Wage, and neither earning more than £100,000 per year. The eligibility criteria are identical to the 30 hours working parent entitlement.

Tax-Free Childcare can be used for nurseries, childminders, after-school clubs and holiday camps, provided the provider is registered with Ofsted or a childminder agency. It can be used alongside the funded hours entitlement but not at the same time as childcare vouchers or Universal Credit childcare.

Parents open a childcare account on the government's Childcare Choices website. Money deposited there can only be withdrawn and paid to registered childcare providers — it cannot be cashed out.

Many eligible families do not claim Tax-Free Childcare, often because they are unaware of it or find the application process unclear.