Most working families can cut childcare costs by combining two kinds of help: funded hours, which pay for a set number of hours directly, and help with the paid hours on top, through either Tax-Free Childcare or the childcare element of Universal Credit. You can use funded hours alongside either of those, but you cannot claim Tax-Free Childcare and Universal Credit childcare at the same time, so choosing the right one matters.
This guide sets out every main scheme across the UK, which ones stack and how to decide. For detailed money-saving tactics such as childminders, shared nannies and holiday clubs, see our guide to saving on childcare costs.
The main schemes at a glance
| Scheme | What you get | Can combine with |
|---|---|---|
| Funded hours (England, Scotland, Wales) | A set number of free hours a week or year | Tax-Free Childcare or UC childcare |
| Tax-Free Childcare | £2 for every £8 you pay in, up to £2,000 per child a year (£4,000 if disabled) | Funded hours; not UC or childcare vouchers |
| Universal Credit childcare | Up to 85% of costs, capped at £1,071.09 a month for one child or £1,836.16 for two or more | Funded hours; not Tax-Free Childcare |
| Childcare vouchers (existing members only) | Salary sacrifice, closed to new joiners since 2018 | Funded hours; not Tax-Free Childcare |
Funded hours in England
England's funded hours are paid directly to an approved provider. They usually cover 38 weeks a year, though many providers "stretch" them over more weeks at fewer hours. They do not cover extras such as meals, nappies or trips, which providers can charge for.
- Working parents: up to 30 hours a week from 9 months old until your child starts school. Each parent must expect to earn at least the equivalent of 16 hours a week at the National Minimum Wage or Living Wage (about £203 a week at the £12.71 adult rate) and less than £100,000 a year adjusted net income. Apply from when your child is 23 weeks old and reconfirm every 3 months.
- All 3 and 4-year-olds: 15 hours a week, whatever your income.
- Some 2-year-olds: 15 hours a week if you get certain benefits or your child gets extra support. Check with your council.
- School-age children: no funded hours, but Tax-Free Childcare or UC help can be used for wraparound and holiday care with registered providers.
Scotland, Wales and Northern Ireland
Funded childcare is devolved, so the offer depends on where you live:
- Scotland: 1,140 hours a year of funded early learning and childcare for all 3 and 4-year-olds and eligible 2-year-olds, regardless of whether parents work.
- Wales: the Childcare Offer for Wales gives eligible working parents of 3 and 4-year-olds up to 30 hours a week of combined early education and childcare. Flying Start provides funded childcare for some 2-year-olds.
- Northern Ireland: no equivalent of England's 30 hours, but the Northern Ireland Childcare Subsidy Scheme reduces registered childcare bills by 15% for families eligible for Tax-Free Childcare, paid into your Tax-Free Childcare account alongside the normal top-up.
Tax-Free Childcare: how it works
You open an online account through gov.uk, pay money in and the government adds 25p for every £1 (the same as £2 for every £8). You then pay your registered provider from the account. The top-up is capped at £500 a quarter per child (£1,000 if disabled), which is £2,000 a year. It covers children up to age 11, or 16 if disabled.
To qualify, you and any partner must each expect to earn at least the equivalent of 16 hours a week at the minimum wage over the next 3 months, and neither of you can have adjusted net income over £100,000. Reconfirm every 3 months or the account stops receiving top-ups. Our Tax-Free Childcare account guide walks through setting it up.
Tax-Free Childcare or Universal Credit: which is better?
You have to choose one. If you take Tax-Free Childcare while claiming UC, your UC claim stops. As a rule of thumb, Universal Credit childcare usually gives more help to lower-income families with high childcare bills, while Tax-Free Childcare suits families whose income is too high for UC.
Example for one child with £800 a month of paid childcare (on top of any funded hours):
| Scheme | Monthly help | You pay |
|---|---|---|
| Universal Credit (if eligible for maximum) | £680 (85%) | £120 |
| Tax-Free Childcare | £160 (20% of £800) | £640 |
The UC figure is the most you could get: UC is reduced as earnings rise, and childcare help is part of your overall award, so higher earners may get little or nothing. Run your figures through a benefits calculator such as the one on gov.uk before switching. Our guide to how Universal Credit works explains the earnings taper. With UC, you usually pay the provider first and report the cost to be reimbursed, so budget for that timing.
Other help families often miss
- National Insurance credits for grandparents. A grandparent or other family member under State Pension age who looks after a child under 12 while the parent works can apply for Specified Adult Childcare credits, transferred from the parent's Child Benefit record, to protect their State Pension.
- Holiday activities. In England, children who get benefits-related free school meals can usually get free places at holiday activity and food programme clubs at Easter, in summer and at Christmas. See our guide to holiday childcare.
- Help for student parents. Childcare Grant for full-time higher education students in England, and Care to Learn for young parents under 20 in education.
- Employer support. Some employers offer workplace nurseries, which are a tax-free benefit, or will fund part of your childcare. Ask HR.
- Child Benefit. £27.05 a week for the eldest child and £17.90 for each other child. Claim it even if your income is over £60,000, as it protects National Insurance credits.
Putting it together: a checklist
- Check which funded hours your child is entitled to now, and when they will qualify for more. Put the application date in your calendar.
- Run a benefits calculator to see whether UC childcare or Tax-Free Childcare gives you more.
- Make sure your provider is registered (Ofsted in England, the Care Inspectorate in Scotland, CIW in Wales); otherwise you cannot use either scheme.
- Ask your provider for an itemised bill so you can see what extras you are paying for.
- Plan for the jump in costs when funded hours stop for the summer or term breaks. The budget planner helps you set a monthly figure.
Building a buffer for childcare costs
Childcare bills are rarely flat across the year: holidays, settling-in sessions and deposits all arrive at once. Setting aside a little each week into a separate pot smooths them out. The savings goal calculator works out the weekly amount for a target such as summer holiday care, and SYM can remind you to put it aside each day. For the bigger picture of what children cost, see our guide to the cost of raising a child.
Childcare support: frequently asked questions
Can I use Tax-Free Childcare with 30 hours free childcare?
Can I get Tax-Free Childcare and Universal Credit at the same time?
What is the income limit for free childcare in England?
How much does Tax-Free Childcare pay?
Does free childcare cover meals and nappies?
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