HM Revenue and Customs (HMRC) runs a scheme that could save working parents up to £2,000 on childcare costs over the 2025/26 financial year. Families who have not yet registered for Tax-Free Childcare could miss out on annual savings of up to £2,000 per child, or £4,000 if their child is disabled.

Tax-Free Childcare can help cover the cost of approved childcare for children aged 11 or under, or up to 16 if the child has a disability. Parents can receive up to £500 (or £1,000 if their child is disabled) every three months, which means for every £8 paid into their online account, they will automatically receive an additional £2 top up from the UK Government.

HMRC stated that it takes just 20 minutes to apply online for a Tax-Free Childcare account and it can be used to help pay for a child’s nursery, childminder, breakfast or after school club or holiday activity club. Once an account is opened, parents can deposit money immediately, so it is ready to be used whenever it is needed and unused money in the account can be withdrawn at any time.

Who is eligible for tax-free childcare?

Eligibility for Tax-Free Childcare Families could be eligible for Tax-Free Childcare if they:

• Have a child or children aged 11 or under. They stop being eligible on September 1 after their 11th birthday. If their child has a disability, they may get up to £4,000 a year until September 1 after their 16th birthday
• Do not receive Tax Credits, Universal Credit or childcare vouchers
• Earn, or expect to earn, at least the National Minimum Wage or Living Wage for 16 hours a week, on average
• Each earn no more than £100,000 per annum

A full list of the eligibility criteria is available on GOV.UK here.

How to apply

You can apply for Tax-Free Childcare online. If you’re married or in a civil partnership and living together, or not married or in a civil partnership but cohabiting as though you are, you must include your partner in your application.

You’ll also need your National Insurance number, Unique Taxpayer Reference (UTR) if you’re self-employed, the UK birth certificate reference number for any children you’re applying for, and the date you started or are due to start work.

There are also special rules if you’re registered as a director with HMRC. You will need to show evidence that you meet the minimum income requirements that prove you’re eligible for the scheme, this could be done through PAYE records.

However, if you do not submit regular PAYE information then you may have to provide additional evidence that shows you are working and expect to meet the minimum income requirements for the next three months.

A statement from your accountant, copies of invoices, wage slips, and bank statements may be required. Additionally, you might need to provide year-end payroll, a letter from your tax agent or adviser confirming your salary has been paid and taxed, and annual wage slips.