Over 300,000 eligible UK households are missing out on a government childcare top-up worth up to £2,000 per year, according to Martin Lewis's MoneySavingExpert (MSE). The scheme, officially called Tax-Free Childcare, provides working families with a 20% top-up on childcare costs, up to a maximum of £500 every three months per child under 11, or £1,000 for disabled children.
MSE described the scheme as a “no-brainer” for those who qualify, but warned that its confusing name may be deterring families from claiming. The scheme is not actually tax-free but rather a top-up payment: for every £8 paid into a Tax-Free Childcare account, the government adds £5. To be eligible, parents must be at least 16, in paid work, and have an expected adjusted net income below £100,000. Those claiming Universal Credit or childcare vouchers cannot use this scheme simultaneously.
Eligibility also requires parents to earn at least the National Minimum Wage for 16 hours per week on average. Over the next three months, this equates to £2,643.68 before tax for those aged 21 or over, £2,256.80 for ages 18-20, and £1,664 for under-18s or apprentices. Self-employed parents who started their business less than 12 months ago can earn less.
Parents not currently working may still qualify if their partner works and they receive certain benefits like Carer's Allowance or National Insurance credits for incapacity. Applications can be made via the Childcare Choices website, and the scheme can be used alongside 30 hours of free childcare for working parents. MSE urged families to check with their childcare provider if they accept Tax-Free Childcare payments.
