What is Tax-Free Childcare? UK Definition 2026/27
Quick Answer
Government tops up 20% for childcare costs up to £2,000 per child per year.
Definition of Tax-Free Childcare
Tax-Free Childcare is a government scheme where for every £8 you pay into a childcare account, the government adds £2 - effectively 20% top-up. The maximum government contribution is £2,000 per child per year (£4,000 for disabled children). Both parents must be working and earning at least NMW for 16 hours/week but under £100,000 each.
Tax-Free Childcare — Key Facts for 2026/27
| Top-up rate | 20% (£2 per £8) |
| Max top-up | £2,000/child/year |
| Max payment | £10,000/year to get max |
| Income limit | Under £100,000 each |
How Tax-Free Childcare Works — Example
- 1Childcare cost: £10,000/year per child
- 2You pay: £8,000
- 3Government adds: £2,000
- 4Savings: £2,000/year
- 5Two children: £4,000 savings/year
How Tax-Free Childcare Affects Your Tax
Tax-Free Childcare helps working families with childcare costs. Its generally better than childcare vouchers for most people. Compare with 15/30 hours free childcare to optimise your benefits.
Official HMRC Guidance on Tax-Free Childcare
For official guidance, refer to HMRC's documentation. Tax rules can change, so always verify current rates and thresholds on gov.uk.
GOV.UK: Tax-Free ChildcareFrequently Asked Questions about Tax-Free Childcare
Accuracy Note
This information is for guidance only and is based on 2026/27 tax year rates. Tax rules are complex and your circumstances may differ. For personal advice, consult a qualified accountant or tax adviser.