Scheme could reduce childcare costs by up to £2,000 per child per year.

Childcare vouchers (and directly-contracted childcare) were withdrawn for brand new applicants from 4 October 2018.

Those who had not already signed up for childcare vouchers previously must have applied for the vouchers and received their first voucher by their last payday before 4 October 2018, in order to continue receiving vouchers.

The tax free childcare scheme is meant to replace the directly contracted childcare and childcare vouchers that were previously offered by employers.

Tax free childcare is not an employer scheme. It is a government scheme that is available to working parents, including self-employed, with children under 12 years old (or under 17 if disabled). The scheme is available in England, Scotland, Wales and Northern Ireland.

The scheme operates directly between the government, parents, and childcare providers via an online account.

If individuals already have a Government Gateway account, they can sign in on the first page. If not, a Government Gateway account can be created by following this link.

How the scheme operates.
For every 80p the parent(s) pays into the Childcare Account, the government will contribute 20p, up to a maximum amount of £2,000 per child per year (and £4,000 per child per year for a disabled child).

Parents must use this on registered childcare including childminders, nurseries, breakfast and holiday clubs, as long as the childcare provider is signed up to the scheme.


Individual parents/guardians or pairs of parents must:

  • be in work (including sick leave or annual leave). If not currently working, an individual parent might still be eligible provided their partner is working and the individual is receiving Incapacity Benefit, Severe Disablement Allowance, Carer’s Allowance or Employment and Support Allowance.
  • be earning at least national minimum wage for 16 hours a week (over the next three months). For self-employed who are not expecting to make enough profit in the next three months, they can use an average of how much they expect to make over the current tax year. A self-employed individual will be exempt from meeting the minimum earnings level in their first 12 months of their self-employment.
  • Not be in receipt of any tax credits, universal credits or employer supported childcare.
  • (when an individual claimant) they should not have an adjusted net income of over £100,000 a year (where the claim is made as a couple, one or both of the claimants should not have income of over £100,000).

If a couple are separate and have joint responsibilities for the child, they should decide which of them apply for the childcare account.

Children will be covered by the scheme up until the last day of the week in which the 1st September following their 11th birthday falls. If they are disabled, this is extended to the last day of the week in which the 1st September following their 16th birthday falls.

Adopted children are eligible, but not foster children.

Please note that if an employer pays directly into a tax free childcare account, the amount will be subject to income tax and Class 1 NIC via payroll.

Article from ACCA In Practice