The Tax-free Childcare Scheme

Tax relief is normally available on childcare costs via the tax-free childcare scheme. Childcare costs might include nursery fees, an after-school club, or a childminder. Payments to a nanny also qualify, provided the nanny is OFSTED registered (in England) or otherwise ‘approved’ (Scotland, Wales or N Ireland).

Your nanny may already be registered (or approved), but do check at interview stage. Even if the nanny is already registered, the process must be renewed every 12 months.

If you don’t qualify for tax-free childcare, you may not want the extra expense associated with a registered nanny. If you can’t join the scheme, a registered nanny is of no financial benefit to you. So the first thing to check is:

Do you qualify for tax-free childcare?

  • You and your partner (if you have one) must each earn less than £100,000pa.
  • You can be employed or self-employed.
  • You and your partner must both work, and each earn more than £152 per week (that’s 16 hours at
    National Minimum Wage). If you are due to start work within the next 31 days you can apply now.
  • You must have a child under the age of 12 (under 17 if disabled).

Ofsted registration (England) or Approved nanny status

If your nanny is not already registered, you are a long way off being able to use tax-free childcare. The nanny has to make an application, and that could take 3 months to come through. In the meantime, you can  purchase tax-free childcare if you want, but you won’t be able to spend it yet. You will need to use alternative funds to meet the cost of the nanny’s net pay and any HMRC bills that arise before the approval comes through; you cannot delay paying your nanny just because the registration is not in place.

You can and should make it a condition of the employment that the application is made within, say, 2 weeks of starting with you. You cannot make the application on the nanny’s behalf, but you can ask to be kept updated on the process. Most employers pay the costs associated with registration and renewal. Ask for our helpsheet ‘How to become a Registered or Approved nanny’ for more details on that.

If you want information on Tax-free childcare and whether it is right for you, ask us for our full helpsheet.