Tax-Free Childcare for Nannies – A Complete Guide to Maximising Your Savings
Childcare costs can be a significant expense for many families, but government support schemes can help reduce the financial burden. Tax-Free Childcare is one of the most effective ways to save money while ensuring high-quality childcare for your children.
Many parents assume this scheme only applies to nurseries and childminders, but it also covers Ofsted-registered nannies. If you employ a nanny, this guide will explain how to claim Tax-Free Childcare, who qualifies, and how to make the most of this scheme.
What is Tax-Free Childcare and How Does It Work?
Tax-Free Childcare is a UK government initiative designed to help working parents pay for childcare by adding government contributions to a designated childcare account.
For every £8 you deposit, the government contributes an additional £2, up to a maximum of £2,000 per child per year (or £4,000 per year for disabled children).
This effectively means that families receive a 20% discount on their childcare costs when using eligible childcare providers, including nannies, nurseries, childminders, and after-school clubs.
A Practical Example
If your monthly childcare costs for a nanny amount to £1,000, you would only need to deposit £800 under Tax-Free Childcare, and the government would add £200. Over the course of a year, this could save you up to £2,000 per child.
This scheme is particularly beneficial for families employing nannies, as it helps make personalised, high-quality childcare more affordable.
Can I Use Tax-Free Childcare for a Nanny?
Absolutely! While many parents associate this scheme with nurseries or childminders, nannies are also eligible—as long as they are registered with Ofsted (or an equivalent regulatory body in Scotland, Wales, or Northern Ireland).
What Does “Registered Nanny” Mean?
To qualify, your nanny must be:
✔ Registered with Ofsted (in England) or the equivalent in Scotland, Wales, or Northern Ireland.
✔ Paid through a payroll system, with taxes and National Insurance contributions correctly managed.
✔ Meeting childcare standards, including first aid training and background checks.
If your nanny is not yet registered, they can apply for Ofsted registration, which will allow your family to benefit from Tax-Free Childcare.
💡 Tip: If your nanny is not registered, consider covering the cost of registration—it is a worthwhile investment that can lead to long-term savings.
Who is Eligible for Tax-Free Childcare?
To qualify for Tax-Free Childcare, you must meet the following criteria:
✅ Your child must be under 12 years old (or under 17 years old if disabled).
✅ You (and your partner, if applicable) must be in paid work, whether employed or self-employed.
✅ Each parent must earn at least £152 per week on average but less than £100,000 per year.
✅ You must not be receiving other government childcare support, such as:
- Childcare Vouchers (scheme now closed to new applicants)
- Universal Credit for Childcare
- Tax Credits for Childcare
If you meet these conditions, you can start benefiting from Tax-Free Childcare immediately.
How to Apply for Tax-Free Childcare
Applying for Tax-Free Childcare is straightforward and can be done online in just a few steps:
1️⃣ Visit the UK Government website: Apply for Tax-Free Childcare.
2️⃣ Create an online childcare account and verify your eligibility.
3️⃣ Deposit funds into your Tax-Free Childcare account.
4️⃣ Use the money to pay your Ofsted-registered nanny.
⏳ Most applications are approved within seven days, and you can start using the funds immediately.
Other Childcare Financial Support Schemes
Alongside Tax-Free Childcare, families may also qualify for other childcare financial support schemes.
Universal Credit for Childcare – Up to 85% of Costs Covered
If you receive Universal Credit, you may be eligible to claim back up to 85% of your childcare costs. The maximum support available is:
£646 per month for one child
£1,108 per month for two or more children
This support can also be used to pay Ofsted-registered nannies.
📌 Find out more & apply: Universal Credit for Childcare.
15/30 Hours Free Childcare – What You Need to Know
Families in England may qualify for 15 or 30 hours of free childcare per week.
Currently, this scheme applies to:
✔ Nurseries
✔ Schools
✔ Childminders
✔ After-school clubs
However, nannies are not included in this scheme. Many industry professionals are advocating for a fairer childcare system that allows parents to use their free hours for nanny care as well.
Support the petition to expand 15/30 hours free childcare to nannies: Sign the petition.
Can a Nanny Be Considered Self-Employed?
In most cases, according to HMRC rules, nannies are not typically classified as self-employed. However, there is an exception where HMRC may grant self-employed status to nannies. This exception usually applies when the nanny works in a series of temporary positions or works for three or more families simultaneously. In such cases, the nanny would also need to register with Ofsted as a childminder. To seek self-employed status, the nanny should contact HMRC directly, as each situation is assessed individually.
It’s important to note that HMRC generally allows anyone to register as self-employed, but being registered as such doesn’t automatically mean that all jobs can be performed under self-employed status.
To determine whether a nanny can be considered self-employed for a particular job, each new family should use the HMRC Employment Status Indicator. The responsibility for making this determination always falls on the employer. Incorrectly classifying a nanny’s employment status can result in significant fines from HMRC.
For further information, please refer to the government link provided below.
https://www.gov.uk/guidance/check-employment-status-for-tax
Maximising Tax-Free Childcare with Nanny Payroll Services
Managing childcare payments, tax contributions, and payroll can be complex. Many families choose to use a nanny payroll service to handle:
✔ Tax-Free Childcare payments directly to their nanny.
✔ Payroll compliance, ensuring taxes and National Insurance are correctly managed.
✔ Integration with government childcare schemes for smooth financial management.
For a trusted nanny payroll service, we recommend NannyPaye. Families from our agency can benefit from an exclusive £25 discount when signing up.
➡ Sign up for NannyPaye & get £25 off with the code FRENCH25:
NannyPaye – Nanny Payroll Service
Using a payroll service ensures you stay compliant with HMRC while making the most of Tax-Free Childcare benefits.
Final Thoughts
Tax-Free Childcare is an excellent way for families to save up to 20% on childcare costs while ensuring high-quality care for their children. If you employ an Ofsted-registered nanny, you can fully benefit from this scheme and reduce your financial burden.
If you’re eligible, apply today and start maximising your childcare savings!
