Tax-Free Childcare Scheme Offers Up to £2,000 in Savings for Working Families

As hundreds of thousands of UK families prepare for their children to start primary school in September, HM Revenue and Customs (HMRC) is urging parents to take advantage of the Tax-Free Childcare scheme, which could save them up to £2,000 per child annually—or £4,000 for children with disabilities—on childcare costs.

This government-backed initiative is designed to ease the financial burden of wraparound care, holiday clubs, and childminders, supporting working families as part of the government’s broader Plan for Change to boost the economy.

The Tax-Free Childcare scheme provides flexible financial support for working parents, allowing them to cover costs for approved childcare services, including before- and after-school care, holiday clubs, and childminders.

For every £8 parents deposit into a Tax-Free Childcare account, the government adds a £2 top-up, equating to up to £500 per child every three months, or £1,000 for children with disabilities. This translates to annual savings of up to £2,000 per child or £4,000 for disabled children, making childcare more affordable during a time of rising costs.

Darren Jones, Chief Secretary to the Treasury, highlighted the scheme’s role in supporting working families:

“Through our Plan for Change, we are putting more money into the pockets of working people, worth up to £2,000 per year through Tax-Free Childcare. This will make it easier for parents to get back into work as we go further and faster to grow the economy.”

Flexible Support for Busy Families

The scheme is particularly timely for parents who have recently learned their child’s primary school placement for September and are now arranging childcare for the start and end of the school day.

Myrtle Lloyd, HMRC’s Director General for Customer Services, emphasised the financial pressures families face:

“Starting school can be an expensive time, there’s a lot to buy and there’s also a lot to organise. Now you know where your child is going to school you can start organising your childcare and Tax-Free Childcare can help make the costs more manageable. Sign up to start saving today HERE.”

Parents can use Tax-Free Childcare to pay for any approved childcare provider, offering flexibility to suit their schedules. Whether it’s wraparound care to cover early mornings or late afternoons, after-school clubs, or holiday programmes, the scheme caters to diverse needs.

Funds in the account can be used immediately, saved for future use, or withdrawn if no longer needed, providing parents with full control over their childcare budget.

Eligibility and How to Apply

The Tax-Free Childcare scheme is available for children aged 11 or under, with eligibility ceasing on 1 September after their 11th birthday. For children with disabilities, support extends until 1 September after their 16th birthday, with up to £4,000 in annual savings.

To qualify, families must meet the following criteria:

•  The parent (and their partner, if applicable) must earn at least the National Minimum Wage or Living Wage for an average of 16 hours per week.

•  Each parent must earn no more than £100,000 per year.

•  Families must not be receiving Universal Credit or childcare vouchers.

Eligible families can also combine Tax-Free Childcare with free childcare hours, subject to meeting the relevant criteria. A comprehensive list of eligibility requirements is available on HERE, where parents can check their eligibility and open an account.

A Boost for Families and the Economy

The Tax-Free Childcare scheme aligns with the government’s Plan for Change, aimed at putting more money back into the pockets of working people and supporting economic growth. By reducing childcare costs, the initiative enables more parents to return to work or increase their working hours, contributing to a stronger economy.

For families navigating the costs of school uniforms, supplies, and childcare arrangements, the scheme offers significant relief. With the ability to save thousands annually, parents are encouraged to explore the scheme and apply promptly to benefit from the savings as their children start school.

To learn more about Tax-Free Childcare, check eligibility, or open an account, visit GOV.UK today.