Tax-Free Childcare on £5,000 Childcare — £25,000 Salary
England, Wales & Scotland · 2025-26 · Government top-up: £1,250/year
Tax-Free Childcare breakdown — 2025-26
| Item | Per year | Per month |
|---|---|---|
| Total childcare cost | £5,000 | £417 |
| Government top-up (25%) | £1,250 | £104 |
| You pay (parent contribution) | £3,750 | £313 |
Am I eligible on a £25,000 salary?
- Both parents must be working (or you are a single working parent)
- Each parent must earn at least £2,167/quarter (equivalent to National Living Wage for 16 hrs/week)
- Neither parent can earn over £100,000/year — £25,000 is within the limit
- Child must be under 11 years old (or under 17 if disabled)
- Your childcare provider must be registered with Ofsted (or equivalent)
Tax-Free Childcare on £25,000: how much do you save?
On a £25,000 salary, Tax-Free Childcare gives you a government top-up of £1,250/year on your £5,000 childcare costs. Instead of paying £5,000 outright, you deposit £3,750 into your TFC account and the government adds £1,250 — bringing the total to £5,000.
Your monthly childcare cost drops from £417 to £313 — a genuine reduction in your household spending without any change to your take-home salary.
Tax-Free Childcare vs salary sacrifice childcare vouchers
If you are currently on an employer childcare voucher scheme (salary sacrifice), you cannot use both schemes simultaneously. Voucher schemes closed to new entrants in October 2018. If you joined before then, compare your annual saving under each scheme before switching — Tax-Free Childcare is generally better for lower earners or those with higher childcare costs.
Frequently asked questions
How much tax-free childcare do I get on £5,000 childcare costs?
With annual childcare costs of £5,000, the government tops up your Tax-Free Childcare account by £1,250/year. You deposit £3,750 and the government adds £1,250, giving a total of £5,000 to pay your provider. Your childcare cost of £5,000 is below £8,000/year, so your top-up is 25% of your costs (£1,250). You would need to spend £8,000 to receive the maximum £2,000 top-up.
How much do I actually pay per month for £5,000 childcare with tax-free childcare?
Without Tax-Free Childcare, £5,000/year costs £417/month. With the government top-up of £1,250, your actual annual cost drops to £3,750 — that is £313/month. This saving applies regardless of your salary (as long as both parents work and neither earns over £100,000).
Can I use tax-free childcare on a £25,000 salary?
Yes — on a £25,000 salary you are well within the £100,000 income limit for Tax-Free Childcare. Both parents must be working and each must earn at least £2,167/quarter in 2025-26. Self-employed parents on £25,000 also qualify.
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