Employer Supported Childcare (480: Appendix 11)
Source: gov.uk (2025-04-05)

Find out more information on how to get tax-free employer supported childcare.

Overview

From 4 October 2018 Employer Supported Childcare closed to new applicants. Employees already registered by that date are able to continue using the scheme for as long as the employer offers it, or as long as they stay with the employer.

Employees may be able to get Tax-Free Childcare instead.

Employers’ workplace nurseries were not affected by the introduction of Tax-Free Childcare.

Find more information on help with childcare costs (https://www.gov.uk/help-with-childcare-costs).

What the exemptions are

1). There are 3 exemptions from Income Tax and National Insurance contributions for the benefit of childcare provided or supported by the employer. Two of the exemptions closed to new applicants from 4 October 2018. The rules are similar but each exemption works differently. In summary, no tax will apply in the following circumstances where the qualifying conditions are met.

a) The employee is given childcare in a nursery or playscheme on premises made available by the employer or for which the employer is at least partly responsible for financing and managing the scheme. Where the relevant conditions are met the whole cost of the benefit is exempt from tax and National Insurance contributions — read section ‘Employer-provided nursery or playscheme’.

b) Childcare vouchers where given to eligible employees up to the relevant exempt amount — read section ‘Childcare vouchers’.

c) Other childcare made available to eligible employees up to the relevant exempt amount — read section ‘Other employer-supported childcare’.

Where the value of the childcare voucher or other childcare provision exceeds the relevant exempt amount the excess is taxed and liable to National Insurance contributions. If childcare is given that does not comply with the qualifying conditions, it’s taxed in full and liable to National Insurance contributions.

For those eligible employees who join an employer’s scheme on or after 6 April 2011 and remain within that scheme the employer must make an estimate of the employee’s relevant earnings amount to work out the relevant exempt amount. For more information about the relevant earnings amount, read EIM16054 (https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim16054).

An eligible employee is only entitled to one exempt amount in a tax week. For example, if the relevant exempt amount is £55 and an employer gives childcare vouchers of £55 in a week for use at a local nursery, and gives £55 of after-school care, the employee will only be entitled to get one exempt amount of £55. All amounts in excess of the limit will be liable to tax and National Insurance contributions.

Tax-Free Childcare voucher allowance

If you joined a childcare voucher scheme before 6 April 2011, the maximum limit on the amount of childcare vouchers that can be received tax free is £55 a week, or £243 a month.

If you joined on or after 6 April 2011, the maximum exempt amount depends on the income tax rate band that the relevant earnings amount falls within.

The weekly and monthly exempt amount limits for each income tax rate band are shown in the following table:

You should use the income tax rate bands (https://www.gov.uk/income-tax-rates) applicable for the relevant tax year, to determine the exempt amount limit.

For tax purposes you’re only entitled to get up to the relevant exempt amount shown above regardless of the number of jobs or employments you may have. For National Insurance contributions you can get an exempt amount from more than one employer. If both you or your partner are given childcare vouchers, you’re each entitled to an exempt amount of childcare vouchers.

Employer-provided nursery or playscheme

2). Nursery or playscheme places, given by the employer are exempt from tax and National Insurance contributions if the:
- employer alone makes premises available for the nursery or playscheme
- employer, jointly with others, for example, voluntary bodies, local authorities or with other employers, makes premises available
- nursery places are offered in a scheme open to either all of the employer’s employees, or all of the employer’s employees at the location where the scheme operates
3). For a jointly run nursery or playscheme to qualify:
- it must be on premises made available by one or more of the participants in the joint scheme
- the employer must be wholly or partly responsible for financing and managing the nursery or playscheme
Section 318(6)

4). Whether the nursery or playscheme is given by one employer, or through a joint scheme, tax exemption will only apply if the facilities comply with any legal requirement for local authority registration.

Meaning of ‘making the premises available’

5). The employer, or one of the participants in a joint scheme, must make the premises available by either:
- using premises that are part of the employer’s, or another participant’s, existing freehold or leasehold property (or equivalent in Scotland)
- acquiring premises specially, by freehold or leasehold, or by hiring suitable premises on licence, for example, a local hall
Section 318(7)

6). Providing the employer, or one of the participants in a joint scheme, makes the premises available, the facilities can be anywhere but the nursery or playscheme cannot be provided on premises that are wholly or mainly used as a private dwelling.

Meaning of ‘wholly or partly responsible for finance and management’ in a joint scheme

7). Overall, the employer’s role in financing and managing the provision of childcare must be a real one. The employer must be accountable for the provision, and liable to be called to account if things go wrong.

‘Finance’ requires a commitment to provide capital and funding for the nursery or playscheme. It needs more than buying in places from a commercial nursery and may be met where, for example, the employer:
- agrees to meet a set proportion of the overall cost of providing the care
- gives financial guarantees to a joint committee or joint company
- gives a long-term undertaking to pay a fixed periodical contribution (for example, for the cost of a given number of places) which is calculated to ensure the overall financial viability of the care facility
‘Management’ means more than being occasionally consulted about the broad policies that apply to a particular nursery or playscheme. It does not necessarily mean day-to-day management or direct responsibility for care of the children. However, it does need close involvement by the employer in:
- appointing and monitoring the performance of those engaged to look after the children
- the extent of the care provided
- the conditions under which that care is provided
- the allocation of places
8). Places will be exempt in nurseries and playschemes where subcontractors give the day-to-day childcare, so long as the conditions governing the provision of premises or the responsibility for finance and management are met.

Provision of nursery or playscheme places to other employees

9). Spare places in a qualifying nursery or playscheme can be given to people who are not the employer’s employees without affecting the employees’ tax position.

Section 270(A)

10). If places in a nursery on the employer’s own premises are provided to another employer’s employees who are working at that location, they’ll also be exempt from tax on the value of the provision.

Childcare vouchers — closed to new applicants from 4 October 2018

11). Childcare vouchers up to the relevant exempt amount provided to eligible employees are exempt from tax, providing the:
- vouchers are used to pay for qualifying childcare
- eligible employee is a parent or has parental responsibility for a child
- vouchers are offered in a scheme that’s (subject to one exception) open to all eligible employees
Section 318(A)

For the exception, read the explanation of ‘open to all’ at paragraph 23.

12). If childcare vouchers are given with a value in excess of the relevant exempt amount, only the excess is chargeable for tax.

13). Childcare vouchers are a non-cash benefit. This means they cannot be exchanged for cash by your employer or childcare provider. If you have unused tax and National Insurance contributions exempt childcare vouchers when you leave your employer’s scheme or you no longer need childcare, you should return the vouchers to your employer. If you get a payment on returning the vouchers, your employer should treat these amounts as pay which will be subject to tax and National Insurance contributions in the normal way.

Other employer-supported childcare — closed to new applicants from 4 October 2018

14). Other qualifying childcare up to the relevant exempt amount given by the employer for the use of eligible employees is exempt from tax and National Insurance contributions where the provision is:
- given for a qualifying child
- offered in a scheme that’s (subject to one exception) open to all eligible employees — for the exception, read the explanation of ‘open to all’ at paragraph 23
15). Other employer-supported childcare includes childcare bought by the employer directly from the childcare provider for the use of the employer’s eligible employees. An example of this is a place in a commercial nursery contracted by the employer and made available to the eligible employee for their child. It does not include the payment by an employer of an eligible employee’s own childcare bill or a cash allowance paid to the eligible employee towards his or her childcare costs.

16). If the cost to the employer of giving the childcare exceeds the relevant exempt amount only the excess is chargeable for tax.

Section 318(B)

17). If the employer pays a retainer, but no care is given, the exemption is not due and the benefit is chargeable to Income Tax and National Insurance contributions. An example of this might be if the child is away on holiday and the nursery requires a retainer. As no care has been given, the exemption is not due for that period.

Definitions

Meaning of child

18). A qualifying child is:

Section 318(B)5
- a child up to 1 September after their 15th birthday
- a child up to 1 September after their 16th birthday if the child is on the blind register or came off it in the last 28 weeks, or a disability living allowance or Personal Independence Payment is payable for the child, and
Section 318C
- the child is the employee’s child or is a child living with the employee for whom he or she has parental responsibility
19). Parental responsibility means all the rights, duties, powers, responsibilities and authority which by law a parent of a child has in relation to the child and the child’s property.

20). Find more information on the qualifying age criteria for Tax-Free Childcare (https://www.gov.uk/help-with-childcare-costs).

Meaning of qualifying childcare

21). Qualifying childcare

The rules seek to make sure that only childcare which meets nationally recognised standards will attract the exemptions from Income Tax and National Insurance contributions. In general terms, the childcare must be registered with or approved by the relevant authorities. The rules are complex because different statutory powers apply to England, Wales, Scotland and Northern Ireland.

22). Registered childcare

Childcare provided away from the child’s home must be registered in:
- England and Wales for children up to and including 7 years
- Scotland for children up to and including 16 years
- Northern Ireland for children up to and including 12 years
Registered childcare within the United Kingdom consists of:

In England only

a person registered under Part 3 of the Childcare Act 2006. This will include persons on the following registers operated by Ofsted the:
- Early Years Register
- General Childcare Register — compulsory part
- General Childcare Register — voluntary part
schools — care provided by the governing body of a school is approved if it takes place:
- outside normal school hours (this means the normal hours of compulsory education adopted by the school as appropriate for the age of the child)
- on school premises, or
- on premises that are covered by the inspection of the whole school activity by Ofsted or the equivalent inspection body for certain independent schools
other care providers — a domiciliary worker or nurse from an agency registered under the Domiciliary Care Agencies Regulations 2002 providing childcare in the child’s home

In Wales only
- a childcare provider registered in accordance with Part 2 of the Children and Families (Wales) Measure 2010
- out-of-school hours childcare, provided by a school on the school premises, or by a local authority
- a person approved under the Approval of Home Childcare Providers (Wales) Scheme 2021, or the Approval of Child Care Providers (Wales) Scheme 2007, providing childcare in the child’s home or — if several children are being looked after — in the home of one of the children
- a domiciliary worker or nurse from an agency registered under the Domiciliary Care Agencies (Wales) Regulations 2004 providing childcare in the child’s home
- a foster parent in relation to a child other than one whom the foster parent is fostering but only in those cases where due to the age of the child the care given does not fall within the first and third bullet points in this section
In Scotland only
- a childcare provider registered by the Scottish Commission for the Regulation of Care
- out-of-school hours childcare clubs registered by the Scottish Commission for the Regulation of Care
- childcare given in the child’s home by, or introduced through, childcare agencies, sitter services and nanny agencies which need to be registered
In Northern Ireland only
- child minding or day care in accordance with Part XI of the Children (Northern Ireland) Order 1995
- out-of-school hours childcare, given by a school on the school premises, or by an Education and Library Board
- a person approved under the Tax Credits (Approval of Home Child Care Providers) Scheme (Northern Ireland) 2006 providing childcare in the child’s home
- a foster parent in relation to a child other then one whom the foster parent is fostering but only in those cases where due to the age of the child the care given does not fall within the first and third bullet points in this section
Outside the UK

Childcare provided outside of the UK cannot generally be accepted as ‘qualifying childcare’ as it’s outside of the jurisdiction of UK inspection and registration. The only exemption to this is childcare given by a person approved under a Ministry of Defence accreditation scheme.

Childcare that’s not ‘qualifying childcare’

‘Qualifying childcare’ does not include care provided by a relative of the child in the child’s own home. This includes relatives who are registered or approved childcare providers. For these purposes a relative means:
- parent
- step-parent
- foster parent
- grandparent
- aunt or uncle
- brother or sister whether by blood, half-blood, marriage or civil partnership
Childcare provided by relatives can be qualifying childcare in the following circumstances the:
- relative is a registered or approved childcare provider
Section 270A(5) and 318A(5)
- care is provided away from the child’s own home
- care is provided to non-related children in addition to the related child or children
Meaning of ‘open to all’

23). Childcare provided through a workplace nursery scheme should be offered under a scheme to which all employees are eligible to apply. The condition does not mean that every employee who wants a childcare place in a scheme must receive a place. Employers may need to prioritise places if more employees apply than the number of places available. How childcare places are prioritised is up to the employer but the scheme should not exclude members of your staff from applying for a place on the basis of:
- grade or position
- level of salary (subject to one exception)
- length of service
- gender
24). Similarly, childcare voucher schemes should be generally open (subject to one exception) to all eligible employees. The condition is not, however, breached if any of the employer’s eligible employees cannot participate in the scheme due to:
- not having any eligible children
- not using eligible childcare
- no advantage being gained in accepting vouchers in place of cash pay
Section 318(8)

The exception is that the ‘open to all’ condition is not breached where employees who earn on or near the National Minimum Wage or National Living Wage are unable to join an employer’s scheme due to the requirement to safeguard payment of the National Minimum Wage or National Living Wage in full.

Section 270A(7) and 318A(7)

The exception does not apply if childcare is provided in a nursery or playscheme. For the workplace nursery exemption, the ‘open to all’ condition is breached if workers who earn on or near the National Minimum Wage or National Living Wage are prevented from joining the employer’s scheme due to the need to safeguard payment of the National Minimum Wage or National Living Wage in full.

Meaning of ‘tax week’

25). ‘Tax week’ means 6 April to 12 April (inclusive) and each successive period of 7 days. Except that the final tax week in a tax year (‘week 53’) is just the last day of the tax year (or last 2 days in a leap year).

Employer supported childcare and tax credits

26). If an employee gets employer supported childcare, their childcare costs for the purposes of the childcare element of Working Tax Credit are reduced by the value of childcare support they get. This applies even if they get childcare support in return for a reduction in their pay.

Their entitlement to tax credits may also be affected if their salary has been reduced under salary sacrifice.

Find contact details and more information on tax credits (https://www.gov.uk/government/organisations/hm-revenue-customs/contact/tax-credits-enquiries).

Employer supported childcare and Statutory Neonatal Care Pay, Statutory Parental Bereavement Pay, Statutory Maternity Pay or Statutory Sick Pay

Statutory Neonatal Care Pay, Statutory Parental Bereavement Pay, Statutory Maternity Pay and Statutory Sick Pay are based on an employee’s average earnings over a fixed period before they get them.

If an employee has agreed with their employer to give up some of their pay in return for childcare support, their average earnings will be based on their cash salary only, and will not include the value of the childcare support received.

This means that the amount of statutory pay they could get may be reduced.

Record keeping

27). The employer should maintain a record of the childcare or childcare voucher scheme rules (for example, letter to all employees or staff handbook) as evidence of meeting the availability condition.

28). Employers are responsible for making sure that the exemptions are only applied where the full conditions are met. Employers should be satisfied that the:
- employees meet the eligible employee requirement
- child for whom the childcare costs arise is a qualifying child
- childcare given is registered or approved and that this has not expired
29). HMRC will accept that employers have done all they can to be satisfied that the conditions have been met if the employer follows these steps:
- made available the scheme rules and included in them that employees must let the employer know of any changes in their circumstances, including in their childcarer’s registration or approval status
- maintained a record of the child’s name and date of birth for whom the childcare costs met by the vouchers arise*
- maintained a record of the childcarer’s registration or approval, number or copy of current letter of approval along with a record of when the registration or approval is due to expire*
- a process is in place to account for tax where registration or approval of the childcarer has lapsed
- checked the employee’s eligibility
*If a childcare voucher provider company administers the scheme on behalf of the employer they can, by arrangement with the employer, obtain and hold this information as long as the employer has access to it.

Employers can check whether a childcarer’s registration or approval is valid in:

In England

Ofsted (Office for Standards in Education, Children’s Services and Skills) (https://www.gov.uk/government/organisations/ofsted).

In Scotland

Social Care and Social Work Improvement Scotland (http://www.careinspectorate.com/).

In Northern Ireland

The Health and Social Services Trust (https://www.nidirect.gov.uk/information-and-services/parents/childcare).

In Wales

Care and Social Services Inspectorate Wales (https://gov.wales/).