Tax-Free Childcare Explained: A Guide For Nanny Employers

Tax-Free Childcare is one of the most under-used benefits available to working parents, and it can make a real difference to the cost of employing a nanny. If you’re not using it and you’re eligible, you could be leaving hundreds of pounds a year on the table.

This guide covers how the scheme actually works, how much you can get, who qualifies, and exactly what you need in place before you can use it to help pay your nanny.

What Is Tax-Free Childcare?

Tax-Free Childcare is a UK government scheme that tops up money you pay into a dedicated childcare account. For every £8 you pay in, the government adds £2, up to a maximum top-up per child.

You can use the funds in the account to pay any childcare provider signed up to the scheme, including nurseries, childminders, after-school clubs, holiday clubs, and nannies who are Ofsted registered or otherwise approved.

How Does Tax-Free Childcare Work?

You open a childcare account online through the government’s Childcare Choices service. You pay money in by Direct Debit, standing order or bank transfer, and the government adds a 20% top-up automatically.

As an example, if you pay in £800, the government adds £200, giving you £1,000 to spend on approved childcare. You then pay your childcare provider directly from the account.

You need to confirm your eligibility every three months to keep the account active and keep receiving the top-up.

How Much Is Tax-Free Childcare Worth?

For most families, the government will add up to £500 per child every three months, a maximum of £2,000 a year.

If your child is disabled, the maximum top-up rises to £1,000 every three months, £4,000 a year.

There’s no limit on how many children you can claim for, provided each one meets the age and eligibility rules below.

Who Is Eligible For Tax-Free Childcare?

To qualify, you’ll usually need to meet all of the following:

• You and your partner (if you have one) must each expect to earn at least the equivalent of 16 hours a week at the National Living Wage or National Minimum Wage, on average, over the next three months (roughly £203 a week for the 2026/27 tax year for those 21 and over). If you’re due to start work within the next 31 days, you can still apply.
• You can be employed, self-employed, or both.
• You and your partner must each earn less than £100,000 a year. If either of you goes over this during the year, you’ll stop being eligible.
• Your child must be 11 or younger (16 or younger if they’re disabled).

If you don’t meet the earnings or income rules, a nanny who is Ofsted registered or approved won’t bring you any financial benefit through this route specifically, so it’s worth checking your eligibility before you factor Tax-Free Childcare into your budget.

Does Tax-Free Childcare Cover A Nanny?

Yes, but only if your nanny is registered. In England that means Ofsted registration; in Scotland, Wales and Northern Ireland it means being on the equivalent approved provider register for those nations.

If your nanny isn’t already registered, the process typically takes around three months to come through once she applies. You can open and start paying into a Tax-Free Childcare account before the registration is complete, but you won’t be able to spend it on your nanny’s pay until the approval is confirmed, so you’ll need other funds to cover pay and any HMRC bills in the meantime.

Registration has to be renewed every 12 months, so it’s worth building a reminder into your own calendar rather than relying on your nanny to flag it. Most families cover the cost of registration and renewal as part of the employment package.

Read our guide to becoming a registered or approved nanny for the step by step process.

How To Apply For Tax-Free Childcare

You apply online through the Childcare Choices website (childcarechoices.gov.uk). You’ll need your National Insurance number, and your partner’s details if you have one, plus your Unique Taxpayer Reference if you’re self-employed.

Approval is usually quick, often within a few working days, and you can start paying into the account and inviting your childcare provider to link to it straight away.

Common Mistakes Parents Make

• Assuming any nanny qualifies. Only Ofsted registered or approved nannies count, agency status or references alone aren’t enough.
• Forgetting the 12-month renewal for the nanny’s registration, which lapses quietly if nobody tracks it.
• Not reconfirming eligibility every three months, which can pause the account without warning.
• Missing the £100,000 earnings cap. It applies per parent, not per household, so a single high earner in an otherwise modest household can still fall outside the scheme.
• Trying to use Tax-Free Childcare for an au pair. It generally doesn’t apply, since most au pair arrangements aren’t registered as approved childcare in the way Ofsted registration requires.

Tax-Free Childcare: Quick Answers

What is Tax-Free Childcare?

A government scheme that adds £2 for every £8 you pay into a dedicated childcare account, up to £500 per child every three months, to spend with approved childcare providers including registered nannies.

How does Tax-Free Childcare work?

You open an online childcare account, pay money in, and the government tops it up by 20% automatically. You then use the account to pay your childcare provider directly.

How much is Tax-Free Childcare?

Up to £500 per child every three months (£2,000 a year), or £1,000 every three months (£4,000 a year) if your child is disabled.

Who is eligible for Tax-Free Childcare?

Working parents who each earn at least the equivalent of 16 hours a week at minimum wage and less than £100,000 a year, with a child aged 11 or under (16 if disabled).

Does Tax-Free Childcare cover a nanny?

Yes, provided the nanny is Ofsted registered (England) or on the equivalent approved register elsewhere in the UK, and the registration is kept up to date every 12 months.

Looking To Hire A Nanny?

When you hire a nanny privately, you become their employer, which means managing payroll, tax and pensions yourself. Nanny Matters handles all of this for you, giving you peace of mind and saving you plenty of time. Register today and let us take care of the hard work.

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