Tax-free childcare: guidance for nurseries

Tax-Free Childcare is a government scheme to support parents/carers in the UK with paying for childcare.

Parents/carers may have questions for your nursery about how to access Tax-Free Childcare. Here, we answer questions parents/carers may ask.

What is Tax-Free Childcare?

Tax-Free Childcare was introduced in 2017 and is available to working households to help with childcare costs. Working parents/carers with children under 12 (under 17 for disabled children) can set up an online childcare account to pay their childcare providers directly. For every £8 parents/carers pay in, the Government will add £2, up to a maximum contribution of £2,000 per child, per year (£4,000 per year for disabled children). To qualify, parents/carers must be working and each earning at least £115 a week and not more than £100,000 per year.

How do parents/carers pay for Tax-Free Childcare?

Parents/carers send payments directly from their Tax-Free Childcare account to the provider bank account. Each child will have a Tax-Free Childcare reference number. Parents/carers can share their reference numbers to help you identify payments.

Am I eligible for Tax-Free Childcare?

Parents/carers can visit the Childcare Choices website to find out if they are eligible for Tax-Free Childcare.

How do I open a Tax-Free Childcare account?

All parents/carers eligible for Tax-Free Childcare can open a Tax-Free Childcare account online here.

Can I top up my Tax-Free Childcare account with additional money?

Yes, this facility is made available for the convenience of parents/carers.

If the childcare bill is more than £2,000 for the quarter, then the parent/carer can pay more into the account so that they can pay the whole bill from one account. However, only the first £2,000 per quarter will receive the government top-up – this is because the government will only top up a Tax-Free Childcare account with 20% of childcare costs up to a total of £10,000 – the equivalent of up to £2,000 support per child per year (or £4,000 for disabled children).

If at the start of the next quarter, any funds in the account haven’t already been topped up, then they will immediately gain a government top-up.

Can I still get Tax-Free Childcare if one parent/carer is disabled?

Tax-Free Childcare is a work incentive scheme so there is a general principle that both parents/carers must be working. However, if one parent/carer is working and the other is in receipt of certain disability or caring benefits from the Department for Work and Pensions (including the Northern Ireland equivalents), then they may be able to receive Tax-Free Childcare.

Disability and caring benefits that act as a passport to Tax-Free Childcare are:

  • Incapacity Benefit
  • Severe Disablement Allowance
  • Long Term Incapacity Benefit
  • Carer’s Allowance
  • Contributory Employment Support Allowance
  • National Insurance Credits on the grounds of incapacity to work or limited capacity for work.

How do new nurseries register for Tax-Free Childcare?

All registered providers – including school nurseries – will receive an invitation. Some providers will need to obtain a Unique Taxpayer Reference (UTR) from their Local Authority if they are not set up as a business in the own right, as they will need their UTR to register for Tax-Free Childcare.

How do nurseries differentiate between siblings receiving Tax-Free Childcare?

Each child has a separate account and a unique reference number, this allows the childcare provider to link the payment received from the Tax-Free Childcare account to the child concerned. The reference number is four letters and five numbers, followed by Tax-Free Childcare. The letters are the first initial and the first three letters of the surname of the parent/carer making the payment. For example, AJON12345TFC. We are exploring the possibility of developing a mechanism to allow childcare providers to check which reference number belongs to which child.

What if I have problems signing-up my nursery for Tax-Free Childcare?

There is a Tax-Free Childcare Customer Interaction Centre (CIC) which childcare providers can call if they are having difficulty signing up for Tax-Free Childcare. The CIC will be able to offer advice and guidance to help providers sign up. The number for the Customer Interaction Centre is 0300 123 4097.

What to do if you haven’t received your Tax-Free Childcare provider invitation letter?

If you have misplaced your Tax-Free Childcare letter, you can call the Customer Interaction Centre on the above number, which can help you sign up.