Last updated: 14 October 2026
How can you get the most tax relief on childcare?
The old employer childcare voucher scheme closed to new joiners in October 2018, but if you’ve stayed in it with the same employer, you can still sacrifice up to £55 a week as a basic rate taxpayer (£28 higher rate, £25 additional rate) free of tax and NIC. Everyone else uses Tax-Free Childcare, where the government adds £2 for every £8 you pay in, up to £2,000 a year per child (£4,000 for a disabled child). You can’t use both at once, so compare them, and check the £100,000 income limit for Tax-Free Childcare.
Comparing the schemes
| Feature | Childcare vouchers (existing members) | Tax-Free Childcare |
| Open to new applicants | No, closed October 2018 | Yes |
| Maximum benefit | About £933 per parent a year (basic rate) | £2,000 per child a year |
| Per parent or per child | Per parent | Per child |
| Income limit | None, though weekly limits fall for higher earners | Each parent under £100,000 adjusted net income |
| Self-employed can use | No | Yes |
| Universal Credit childcare element | Not alongside | Not alongside |
Which is better?
- Families with one child and two parents in vouchers may do better staying in vouchers
- Families with two or more children usually gain more from Tax-Free Childcare, as it’s per child
- If you leave your employer or take a career break of over a year, you lose voucher membership permanently
Example
Sarah and Imran both have childcare vouchers through their employers, saving about £933 each a year, £1,866 in total. Their second child starts nursery in 2026. With two children, Tax-Free Childcare could give up to £4,000 a year if they spend £16,000 on childcare. Switching makes sense, but they must both leave the voucher scheme within 90 days of opening the account.
Funded hours
In England, working parents can get 30 hours of funded childcare a week for children from 9 months to school age, term-time. This is separate and can be combined with Tax-Free Childcare. Each parent must earn at least the equivalent of 16 hours a week at the minimum wage and no more than £100,000.
Using the £100,000 limit
If your adjusted net income is just above £100,000, a pension contribution can bring it below the limit and restore both Tax-Free Childcare and funded hours.
For employers
Employers that still run voucher schemes for existing members save 15% employer NIC on the sacrificed amount. Workplace nurseries remain exempt from tax for employees and are open to new users.
Common mistakes
- Leaving a voucher scheme without checking the alternative
- Forgetting to reconfirm Tax-Free Childcare every 3 months
- Not counting a bonus that pushes income over £100,000
- Assuming the self-employed can’t get help
Self-employed parents
Self-employed parents can use Tax-Free Childcare and funded hours if they expect to earn the minimum income over the next 3 months. New businesses get a 12-month start-up period where the minimum income test doesn’t apply.
Frequently asked questions
Can I rejoin childcare vouchers?
No, once you leave you can’t rejoin.
Do grandparents count as childcare?
Only if they are registered childminders.
Can I use Tax-Free Childcare for holiday clubs?
Yes, if Ofsted-registered.
Does Universal Credit help?
It covers up to 85% of costs instead.
Related: paternity leave and government help, childcare after maternity leave and bonus on a £95,000 income.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with childcare and employee benefits. See our small business accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
