rules for tax-free childcare

The rules for tax-free childcare

04/05/2021Personal Tax , Tax Issues , Tax Saving Tips

In Oct 2018, the tax-free voucher was replaced by a tax-free childcare scheme. The childcare scheme is aimed at providing £2000 annually per child for child care costs. The childcare cost for disable children is up to £4,000 a year. But only 1 in 5 amongst 1.3 million families have registered for this scheme.

Find out the details about the scheme and its benefits.

The rules for tax-free childcare


Tax-free Childcare Rules During Coronavirus:

  • If you are earning below your normal income in coronavirus, the childcare entitlement will be provided to you. As your minimum income should be £140 weekly. And if you are temporarily earning less during the covid times, you should still be eligible for what you have earned.
  • If you usually earn more than £100,000 but your income has decreased last year due to Covid, you may be eligible for tax-free childcare. On the contrary, if you earn above £100,000, you are not eligible for this.


Why Pay for Childcare and How many Hours for Free

Babies aged 3 to 4 can get at least 10 hours of childcare or preschool education without any fees, but it varies from state to state. Let’s find out the details of England.



In England, the childcare duration is 15 hours for all 3 to 4 years children. This makes 570 hours in a year. You can avail another 15 hours for free if one of you and your spouse earns below £100,000 a year. For eligibility, your weekly earning should be £140.

Contact our chartered accountants to find out the latest rules of tax-free childcare.


Availing Universal Credit for Childcare Cost

If you and your spouse are working and paying for childcare, you can claim back around 85% of your childcare cost through universal credit. So before going to tax-free childcare, just go through the eligibility criteria to avail maximum benefits.



It’s difficult to find out your eligibility criteria for universal credit. But as a general rule, if your household earning is less than £40,000 a year, you should use Universal Credit and Benefit calculator to check your eligibility criteria. Some people with more household income may also be eligible for it.


How Much You’ll Get

We can take help for childcare costs from universal credit if you are earning low. It doesn’t depend on the number of hours you work there. You can get back 85% of your cost under universal credit. It becomes a maximum of £646.35 monthly for a single child and a maximum of £1,108.40 monthly for two or more children.


Points to Remember:

You can get universal credit and 30 hours of free childcare in England simultaneously.
You can’t claim universal credit with tax-free childcare.
Along with universal credit, you can use childcare vouchers (available for some).

Get help from our experts anytime.


How to Apply

You can create an online account at the government tax-free childcare website to apply.  It’ll take 20 minutes to set up and you will need a National Insurance number to register (unique taxpayer reference for self-employed).


For further guidance on tax-free childcare, feel free to reach out.


Disclaimer: This blog provides general information on the rules of tax-free childcare.

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How to Apply for Tax-Free Childcare

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Government Childcare Scheme – Tax-Free Top-Up Working parents can receive a tax-free top-up from the Government to help with their childcare costs. The top-up is worth £500 every three months (£2,000 a year). A higher top-up of £4,000 a year (£1,000 every three months) is available where the child is disabled. To receive the top-up, …

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