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For every GBP 8 you pay into the childcare account the government adds GBP 2 (20% of the total), up to the yearly cap per child. Both parents must usually work and each earn under GBP 100k. Cannot be combined with childcare vouchers or the childcare element of Universal Credit: for many UC families, UC's childcare support pays more.
What The Tax-Free Childcare Calculator Works Out
- Government adds per year: 20% of your annual childcare bill, capped at GBP 2,000 per child per year (GBP 4,000 for a disabled child). For every GBP 8 you pay into the online childcare account the government adds GBP 2, which is 25% on top of your contribution and 20% of the resulting total. On an GBP 800 a month nursery bill the state quietly pays GBP 160 of it.
- You actually pay per year: the bill minus the top-up. The cap bites at GBP 10,000 of childcare a year per child, so a GBP 1,200 a month bill still only attracts GBP 2,000.
- Per month: your share divided by 12. The account spends with any registered provider: nurseries, childminders, wraparound clubs and holiday schemes all qualify, and unused money can be withdrawn with the government simply reclaiming its share.
- Highest earner's adjusted net income (advanced): each parent must earn under GBP 100,000 of adjusted net income, a sharp cliff edge rather than a taper. Pension contributions to duck back under it are a standard planning move, and the card shows the contribution needed.
- Months a year you pay (advanced): for term-time-only or seasonal childcare. The cap works quarterly (GBP 500 per child per quarter), so lumpy payments can waste some of it; the card shows the unused quarterly headroom.
- Universal Credit alternative (advanced): UC's childcare element refunds 85% of costs up to a monthly cap (about GBP 1,071 for one child, GBP 1,836 for two or more). The two schemes cannot be combined and UC usually pays more for those entitled to it, so check before opening a Tax-Free Childcare account.
- Top-up over the years (advanced): the annual top-up multiplied by the years until the childcare ends, at today's costs. Eligibility runs to the September after the child's 11th birthday, or 16 for disabled children, and the account must be reconfirmed every three months to stay live.
- Paid in by grandparents or others (advanced): anyone can pay into the account and their money earns the same top-up, so GBP 80 from a grandparent becomes GBP 100 at the nursery. The account also runs alongside the funded free hours, covering the hours and extras they do not.
Further reading: GOV.UK: Tax-Free Childcare.