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Funding & money

Tax-Free Childcare vs childcare vouchers — which saves more?

Childcare vouchers closed to new applicants in 2018 but thousands of parents still hold accounts. Should you switch to Tax-Free Childcare? Here’s the maths.

Reviewed by the Nursery Advice editorial teamLast updated 2 July 2026Next review 30 November 2026Editorial standards

Tax-Free Childcare (TFC) tops up your childcare spending: for every £8 you pay in, the government adds £2, up to £2,000 per child per year (£4,000 if your child is disabled)1. Employer childcare vouchers are a salary-sacrifice scheme — the childcare voucher scheme closed to new entrants in October 2018. So are childcare vouchers still available? Only if you were already using them by that date; existing users can keep going, but no one new can join.

You can’t use both. If you’re already on vouchers and a new baby arrives, you have to decide. The right answer depends on your tax band, how much you spend, and whether your partner also uses vouchers.

How each scheme works

Tax-Free Childcare

  • You open a childcare account via gov.uk.
  • For every £8 you pay in, the government adds £2 (20% top-up).
  • Cap: £2,000 top-up per child per year (so £8,000 of your money + £2,000 of theirs = £10,000 spend).
  • Per child, not per parent. Both parents can pay in.
  • Available to working parents earning between roughly £796 and £100,000 each.

Childcare vouchers

  • Closed to new entrants since 4 October 2018. Existing users only.
  • You give up part of salary in exchange for vouchers — no income tax or NI on the sacrificed amount.
  • Cap: £243 a month for basic-rate taxpayers (£124 for higher-rate, £97 for additional-rate).
  • Per parent, not per child — so a couple both on vouchers can sacrifice twice the cap.
  • No income upper limit.

Which scheme wins for which family

Your situation Usually better off with
One child, both parents basic-rate, spend < £9,000/yr Childcare vouchers (if you have them)
One child, spend > £9,000/yr Tax-Free Childcare
Two or more children in childcare Tax-Free Childcare (cap is per child)
One parent earns over £100,000 Vouchers (if you have them) — TFC isn’t available
One parent doesn’t work Vouchers (if you have them) — TFC isn’t available

Worked examples

Two children, £12,000/yr each in nursery fees

TFC: max £2,000 top-up per child = £4,000 saved.
Vouchers (couple): £243 × 12 × 2 = £5,832 sacrificed, saving ~£1,866 in tax & NI for basic-rate couple. TFC wins by ~£2,100.

One child, £6,000/yr in fees, basic-rate couple still on vouchers

TFC: 20% of £6,000 = £1,200 saved.
Vouchers (couple): ~£1,866 saved. Vouchers win by ~£660.

How to switch from vouchers to TFC

Switching is one-way — once you leave vouchers, you can’t go back. Before switching, confirm your nursery accepts TFC — find a nursery near you to check acceptance and current fees side-by-side. Steps:

  1. Open a Tax-Free Childcare account on gov.uk.
  2. Tell your employer in writing within 90 days that you want to leave the voucher scheme.
  3. Confirm with your voucher provider that no further deductions will be taken.

Whichever scheme you use, you can pay any TFC-registered nursery listed on Nursery Advice straight from your childcare account.

Run your numbers

Childcare cost calculator

Open full tool
England (outside London)
Estimated net cost
£3,163/ year
£264 / month · £61 / week
  • Net to you£3,163
  • Funded hours£7,980
  • Tax-Free Childcare£332
Child's age

2 years

Days per week
Hours per day
Include hidden charges (£12/day)

Most nurseries charge a daily supplement for food, nappies, sun cream and trips on top of fees and funded hours. The England (outside London) average is around £12 per day your child attends. Toggle off if your nursery doesn't.

Term-time only (38 weeks)

Otherwise we use 51 weeks of nursery a year.

Both parents working

Each earning at least minimum wage and under £100k. Unlocks working-parent funded hours & Tax-Free Childcare.

Receiving Universal Credit

Unlocks the 85% UC childcare element instead of Tax-Free Childcare.

Frequently asked questions

Can I use TFC alongside the funded 30 hours?
Yes — use the 30 funded hours for the bulk of your nursery time, then TFC to soften the cost of any additional hours and consumables.
Can I use TFC if I’m on Universal Credit?
No — the two schemes are mutually exclusive. Most UC claimants are better off staying on UC childcare element (up to 85% of costs back, capped).
What happens if I go over £100,000?
You lose TFC for the next quarter. Reconfirm every 3 months — if you’re back under the cap by reconfirmation, you regain eligibility. See our Tax-Free Childcare login guide for how reconfirmation works.
My partner doesn’t work. Can we use TFC?
Generally no — both parents need to be working (or on parental leave / starting work soon). There are exceptions for partners on certain benefits including Carer’s Allowance.

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About this guide & sources

Every numerical claim in this guide is sourced from UK government, NHS or recognised charity publications. We re-check each source on the article’s review date.

  1. GOV.UK — Tax-Free Childcare — what it is (retrieved 2026-05-21)
  2. Childcare Choices — Childcare calculator and scheme comparisons (retrieved 2026-05-21)

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