How the Government childcare scheme works


Should I Use the Government Tax-Free Childcare Scheme? 

The Government’s Tax-Free Childcare scheme offers up to £2,000 a year per child towards childcare costs (£4000 if your child is disabled).  

Here’s the lowdown on how it works to help you decide if it benefits you. 

How Does the Scheme Work? 

To take part in the scheme you need to open a tax-free childcare account. For every 80p you pay in, the government adds 20p. You then pay your childcare setting or provider from that account, effectively reducing your childcare costs by 20% (the same rate as basic-rate tax). 

For example, if your childcare bill is £500 per month, you’d pay £400 into your tax-free account and the government would pay in the remaining £100. 

You can use the scheme to pay for up to £10,000 of childcare per year, which would give you an extra £2000 per child from the government. 

What Are the Criteria for Joining the Scheme? 

To qualify for the tax-free childcare scheme, you will need to meet the following criteria: 

  • You (and your partner, if you have one) need to be working and earning a minimum of £131 a week – this is the equivalent of 16 hours/week at the national minimum wage for 25-year-olds or over.  
  • Each parent needs to earn less than £100,000 a year. 
  • Your child must be aged 11 or younger (or 17 if your child is disabled). 

I’m Self-Employed – Can I Use the Scheme? 

Yes, you can. As long as you (and your partner, if you have one) meet the above criteria and your three-monthly average income meets the £131-per-week minimum. 

What Kind of Childcare Can I Use It For? 

You can use your tax-free childcare account to pay for a wide range of childcare settings. Your provider must be registered with the tax-free childcare scheme as well as with a regulator, such as Ofsted, the Early Years Register or the Childcare Register. 

Many holiday clubs, breakfast clubs and some activity camps are also included, as well as providers like nurseries, childminders, playgroups and nannies. 

How Do I Sign Up? 

Once you’ve checked that you meet the qualifying criteria, head to to apply for a childcare account. Once your account is open, you can add money using a debit card or setting up a standing order. You’ll have to reconfirm your eligibility every three months – this just involves ticking a box to confirm that your circumstances have not changed. 

Is it worth using the scheme? 

The tax-free childcare scheme is worth signing up for if you and your partner are both working, earning more than the minimum threshold (and less than the maximum) and you pay for childcare.  

If you work for a company that still offers Childcare Vouchers and you signed up for them before the introduction of the tax-free scheme in October 2018, you should weigh up both schemes to see which is of most benefit to your personal circumstances. This will depend on how much you earn and how much you spend on childcare.