Tax-Free Childcare for Nannies: 2026 UK Guide
Tax-Free Childcare gives most UK working parents a 20 percent top-up on what they pay for approved childcare, up to £2,000 per child per year. You can use it to pay your nanny, but only if she’s on the Ofsted Voluntary Childcare Register. This guide covers eligibility, the Ofsted step most families miss, and how the actual payments work once you’re set up.
Tax-Free Childcare for a nanny is one of the better government schemes left in the UK childcare system. For most working families, it knocks £2,000 off the annual nanny bill per child, paid as a top-up to whatever you put into a dedicated account.
The catch is the bit nobody mentions on first reading. Your nanny needs to be on the Ofsted Voluntary Childcare Register before you can use Tax-Free Childcare to pay her. This guide walks through how the scheme works, whether you qualify, the Ofsted step, and what the payments look like once everything’s in place.
Can I use Tax-Free Childcare to pay my nanny?
Yes, you can use Tax-Free Childcare to pay your nanny, but only if she’s registered with Ofsted on the Voluntary Childcare Register (or the equivalent regulator in Scotland, Wales, or Northern Ireland). Without that registration, your Tax-Free Childcare account can’t make payments to her. This is the single biggest blocker for nanny employers using the scheme.
Nurseries and childminders are registered with Ofsted automatically as part of how they operate. Nannies aren’t. By default, a UK nanny isn’t on any register, which is fine for employment purposes but blocks her from receiving Tax-Free Childcare payments.
The fix is for her to join the Ofsted Voluntary Childcare Register. It’s called “voluntary” because Ofsted doesn’t require nannies to register, but every government childcare scheme does. Gov.uk explains the registration process in full.
Who is eligible for Tax-Free Childcare?
Both parents (or the sole parent) must be working and each expecting to earn at least the minimum income threshold over the next three months. Neither parent can expect to earn more than £100,000 in adjusted net income this tax year. You also can’t claim Universal Credit, tax credits, or childcare vouchers at the same time. Self-employed parents qualify.
The eligibility rules look strict on paper but cover most dual-income working families with one parent earning under £100k. The current thresholds are on the gov.uk Tax-Free Childcare page, including the minimum income figure (roughly 16 hours a week at National Living Wage).
The £100,000 cap is per parent, not joint, and it’s a cliff edge. Earning £100,001 in adjusted net income loses you Tax-Free Childcare for the entire tax year. Pension contributions count against adjusted net income, so for borderline-income families, topping up pension contributions before the year ends is the standard way to stay eligible.
You re-confirm your eligibility every three months. Miss the reconfirmation and your account pauses until you sort it out.
How does the £2,000 top-up actually work?
For every £8 you deposit into your Tax-Free Childcare account, the government adds £2. The cap is £500 per child per quarter, or £2,000 per child per year. For a disabled child, the cap doubles to £4,000 per year. You pay your nanny’s net wage directly from the account.
You open the account at the gov.uk Tax-Free Childcare service. Money you deposit gets topped up automatically. You then send payments from the account to your nanny’s bank account or to your payroll service, depending on how you’re set up.
The scheme covers each child up to the September after their 11th birthday, or up to 16 for a child with a disability. You can use it alongside the free childcare hours scheme for eligible 2 to 4-year-olds, provided your nanny can deliver them.
A quick example
Your nanny earns a gross wage of £30,000 a year. Her net wage, after PAYE and NI, is roughly £24,000. With Tax-Free Childcare for one child, you can pay up to £2,000 of that net wage from the government’s top-up, by depositing £8,000 of your own money into the account. With two children, that doubles to £4,000 from the government on £16,000 of your own contributions.
The Ofsted Voluntary Childcare Register step
The bit nobody tells you upfront. Your nanny needs to be on the Voluntary Childcare Register before you can use Tax-Free Childcare. The process takes four to eight weeks and costs a few hundred pounds.
Your nanny needs to complete:
- A paediatric first aid course (12-hour Ofsted-approved).
- A Common Core Skills training course.
- An enhanced DBS check.
- The Ofsted Voluntary Register application itself, with the current fee.
Total cost is typically £250 to £400, plus a few weeks of elapsed time. Most families pay or contribute to these costs, because the benefit accrues to them, not the nanny. If you’re hiring a new nanny, ask at interview whether she’s already Ofsted-registered. Many nannies who’ve worked with TFC-paying families before already are.
Is the Ofsted step worth it?
For most working families with a full-time nanny, yes, by a wide margin. The maths is straightforward.
A nanny costing £30,000 a year in gross wages generates a maximum Tax-Free Childcare top-up of £2,000 per child per year. For one child, the payback period on the £250 to £400 Ofsted registration cost is roughly six to eight weeks. For two children, it’s under a month.
The exception is single-child families where one parent earns near or above the £100,000 cap. In that case, your Tax-Free Childcare eligibility may be unstable from year to year, so the Ofsted investment makes less obvious sense. Run our UK nanny cost calculator to see the full picture for your situation.
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Try for free →How do I pay my nanny from a Tax-Free Childcare account?
You transfer money from your Tax-Free Childcare account to your nanny’s bank account or directly to your payroll service. This payment covers her net wage only. PAYE, employee NI, employer NI, and pension contributions still go to HMRC and the pension provider as normal. Tax-Free Childcare doesn’t change your payroll obligations.
This is the part most families get wrong on their first attempt. Tax-Free Childcare pays the nanny’s net wage. It doesn’t cover the employer NI you owe, the pension contribution you owe, or the holiday pay you accrue. Those still come out of your regular bank account and still flow through your payroll service.
For the full picture of what payroll actually involves, our UK nanny payslip guide walks through every line.
Once you’re set up, the payment flow looks like this:
- You deposit money into your Tax-Free Childcare account at the start of each month (or set up a standing order).
- The government adds the 20 percent top-up automatically.
- You send the net wage payment from the TFC account to the nanny (or payroll service).
- You pay PAYE, NI, and pension from your normal bank account, separately, to HMRC and the pension provider.
Common Tax-Free Childcare mistakes
Assuming your nanny is already registered. She probably isn’t. Always check before you start planning to use Tax-Free Childcare.
Staying on childcare vouchers when TFC would pay more. The old employer childcare voucher scheme closed to new claimants in October 2018, but existing participants can stay. For most multi-child families and lower earners, Tax-Free Childcare pays more. For higher earners with low childcare costs, vouchers can be marginally better. Run both numbers.
Forgetting to reconfirm every three months. HMRC pauses your account if you miss the reconfirmation. The reconfirmation itself takes about 30 seconds online. Set a recurring calendar reminder.
Mixing Tax-Free Childcare with Universal Credit. You can’t claim both for the same child. If your household uses Universal Credit, check the childcare costs element instead.
Treating Tax-Free Childcare as a replacement for payroll. It isn’t. You still owe PAYE, NI, and pension on the full gross wage. TFC just helps fund the net wage portion. If you’re also running a nanny share, each family can claim Tax-Free Childcare independently for their child.
Tax-Free Childcare is genuinely one of the best ways to lower the cost of a nanny in the UK. The Ofsted registration step is the only meaningful friction, and once that’s done, the scheme runs quietly in the background for as long as your children are eligible. Try hōra free alongside it to keep the hours that underpin every payment cleanly tracked.
Frequently Asked Questions
Is Tax-Free Childcare the same as childcare vouchers?
No. Tax-Free Childcare replaced the old employer childcare voucher scheme for new claimants in October 2018. If you’re already on vouchers, you can stay on them, but new families can only join Tax-Free Childcare.
How long does it take for a nanny to register with Ofsted?
Plan for four to eight weeks from start to finish. The nanny needs a paediatric first aid course, a Common Core Skills course, an enhanced DBS check, and the Ofsted application. The actual Ofsted decision usually arrives within a few weeks of submitting the application.
Can both parents top up the Tax-Free Childcare account?
Yes. The account is shared between the two parents. Either can deposit money, and either can release payments. The 20 percent top-up is added automatically, up to £500 per child per quarter.
What if my nanny doesn’t want to register with Ofsted?
Without Ofsted registration, you can’t use Tax-Free Childcare to pay her. You can still employ her, but you lose the £2,000-per-child top-up. Many families offer to pay or contribute to the Ofsted registration costs because the benefit accrues to them.
Do I lose Tax-Free Childcare if my income goes over £100,000?
Yes. The £100,000 cap is per parent and is a cliff edge. Even £1 over and you lose Tax-Free Childcare for the rest of the tax year. Pension contributions count against adjusted net income, so increasing pension contributions before the deadline is a common way to stay eligible.