Tax-Free Childcare: How Parents Can Save up to £2,000 on Childcare Costs
A short guide this often-overlooked government scheme to reduce your childcare expenses.
11 Mar, 2025
If you're a working parent and your child is 11 or under, you might qualify for the government-backed Tax-Free Childcare scheme. Read on to see if you could save £2,000 a year on nurseries, carers, clubs and more.
Given the eye-watering cost of childcare in the UK, you’d think that parents would snap up every benefit offered to them. But research suggests that more than a third of eligible parents don’t use the tax-free childcare scheme. They are missing out on as much as £2,000 each year from the government. How can you claim your benefit?
What does the Tax-Free Childcare scheme pay for?
Introduced in 2017 to replace Childcare Vouchers, the Tax-Free Childcare scheme helps pay for a range of childcare options, including childminders and nurseries, after school clubs and home care agencies.
If you qualify, the government will pay £2 for every £8 you pay your childcare provider.
Worth up to £2,000 a year (paid in four quarterly installments), you can claim Tax-Free Childcare AND claim 30 hours of free childcare if you qualify for both. However, you cannot claim Tax-Free Childcare at the same time as claiming Universal Credit, Working Tax Credit or Child Tax Credit. To figure out which one could leave you better off, use the Gov.UK Childcare Calculator.
Do I qualify for Tax-Free Childcare?
In short…
You can usually get Tax-Free Childcare if you (and your partner, if you have one) are
in work
on sick leave
or on parental leave for another child
You need to earn at least the National Minimum Wage for 16 hours a week on average but less than £100,000.
Your child needs to be 11 years old or younger and usually live with you.
See more of the detail on Gov.uk.
Can I even afford to go back to work?
Many working parents are struggling to balance childcare costs with office hours, with a staggering 96% agreeing that childcare costs are too high. In the same survey, carried out by Perrys Chartered Accountants, 84% of part-time working parents said they would work longer hours if childcare was cheaper.
These survey results come as no surprise, owing to the astronomical costs of childcare in the UK. For example, the average cost of sending a child under two to nursery for 25 hours a week is £138. This contributes to childcare costs that, on average, make up around 33% of a family’s outgoings – up to 29% higher than in other European countries.
Kate Clifford, a part-time working parent of three who took part in the survey, commented:
Since I returned to employment, my husband and I haven’t taken time off together. We share our annual leave in order to reduce the costs of childcare during the school holidays. It can be incredibly expensive with three children attending a club daily during a five-day week. Fortunately, the company I work for is flexible and allows me to work my hours around childcare arrangements to help me to minimise costs. However, not every working parent has this option.
How to figure out your working/parenting balance
The Government’s interactive tool allows you to figure out the best combination of working hours and childcare for your family. It’s free and really helpful for getting a bit of clarity.
Learn more about the scheme and check your eligibility with the following Gov.UK links:
See more of the nitty-gritty details
Apply for 30 hours free childcare
