Childcare is one of the biggest costs facing UK working families. Understanding which government support you are entitled to can make a significant difference — Tax-Free Childcare alone can save families up to £2,000 per child per year. This guide explains how each scheme works and how to calculate your total childcare subsidy.
For the full PocketWise guide to family finances, see the Benefits and Support Hub.
Overview of UK childcare support schemes
| Scheme | Who it helps | Maximum saving |
|---|---|---|
| Tax-Free Childcare | Working parents, income under £100k each | £2,000/year per child (£4,000 for disabled children) |
| 30 hours free childcare | 3–4-year-olds, working parents | ~£5,000–£7,000/year (dependent on local rates) |
| 15 hours free childcare | All 3–4-year-olds; 2-year-olds if parents work | ~£2,500–£3,500/year |
| UC childcare element | Families on Universal Credit | Up to 85% of childcare costs |
| Childcare vouchers | Legacy scheme — no new entrants since 2018 | Up to £55/week (£2,860/year) per parent |
Tax-Free Childcare
How it works
You deposit money into a government-managed online account (through National Savings and Investments). For every £8 you put in, the government adds £2 — a 25% top-up.
Example: monthly nursery costs of £1,000
| Without Tax-Free Childcare | With Tax-Free Childcare |
|---|---|
| Pay provider: £1,000 | Deposit into account: £800 |
| Government top-up: £0 | Government adds: £200 |
| Your cost: £1,000 | You pay provider: £1,000 from account |
| Annual cost: £12,000 | Annual cost: £9,600 (saving: £2,400) |
Wait — but the cap is £2,000 per year per child. So if your monthly nursery bill is £1,000, you save the maximum £2,000 per year.
At what nursery spend does the cap kick in?
£2,000 ÷ 25% = £8,000/year (£667/month) — at nursery costs above £667/month, the government top-up is capped at £2,000.
Who is eligible?
- Both parents (or the sole parent) must be working
- Each parent must earn at least 16 hours × NMW per week (£12.21 × 16 = £195.36/week in 2025/26)
- Each parent must earn under £100,000 per year
- Partners on parental leave, adoption leave, or sick leave remain eligible
- You must reconfirm eligibility every 3 months
What can Tax-Free Childcare pay for?
- Ofsted-registered nurseries and day care
- Registered childminders
- Registered after-school clubs and holiday clubs
- HMRC-registered nannies (less common)
Tax-Free Childcare cannot pay for school fees, nannies who are not HMRC-registered, or informal (unregistered) childcare.
30 hours free childcare for 3–4-year-olds
Eligible families receive 30 hours of free childcare per week during term time (38 weeks), or 1,140 hours spread across the year if your provider offers it.
How much is 30 hours worth?
The government pays providers a ‘funded rate’ which varies by local authority — typically £5.50–£8.50 per hour in England (higher in London).
Estimated annual value:
| Funded rate | Hours | Annual value |
|---|---|---|
| £5.50/hr | 1,140 | £6,270 |
| £7.00/hr | 1,140 | £7,980 |
| £8.50/hr | 1,140 | £9,690 |
Important: providers are allowed to charge ’top-up’ fees for meals, consumables (nappies, sunscreen), and optional activities. The free hours cannot be used for sessions under 2 hours or sessions that cost extra.
Applying for 30 hours
Apply at gov.uk/apply-free-childcare-if-youre-on-universal-credit. You receive a code to give your provider. Reconfirm eligibility every 3 months or your entitlement stops.
Universal Credit childcare element
If you are on Universal Credit and working, UC can cover up to 85% of registered childcare costs, with a monthly cap:
- 1 child: up to £1,014.63/month covered (85% of up to £1,193.68)
- 2+ children: up to £1,739.37/month covered (85% of up to £2,046.32)
The UC childcare element is often more generous than Tax-Free Childcare for lower earners. You cannot claim both simultaneously — choose the scheme that gives you the most.
When UC childcare is better than Tax-Free Childcare:
At monthly nursery costs of £1,000:
- Tax-Free Childcare saves 25% = £250/month (capped at £166.67/month)
- UC childcare covers 85% = £850 claimed back = £150/month your cost
UC childcare is clearly better for lower earners. At higher incomes (where UC tapers out), Tax-Free Childcare becomes more useful.
Average UK nursery costs (2025)
| Child age | England (excl. London) | London |
|---|---|---|
| Under 2 | £55–£80/day | £90–£130/day |
| 2 years | £50–£70/day | £80–£120/day |
| 3–4 years (before free hours) | £45–£65/day | £75–£110/day |
| After 30 free hours | Variable top-up fees | Variable top-up fees |
A 5-day nursery place for an under-2 outside London: approximately £1,300–£1,750/month before any subsidies.