What is the difference between vouchers and Tax-Free Childcare?

Childcare vouchers are a closed salary-sacrifice scheme that saves income tax and National Insurance on a capped amount each month. Tax-Free Childcare is the current government scheme that adds 20p for every 80p you pay in, up to £500 per child per quarter.

Who can still use childcare vouchers?

The voucher scheme closed to new entrants in October 2018. Only employees who joined before then and have stayed with the same employer without a break of more than a year can continue to receive vouchers.

How much can vouchers save?

Basic-rate taxpayers can take up to £243 a month tax and NI free, higher-rate up to £124, and additional-rate up to £110. The saving is the combined income-tax and NI rate applied to the voucher amount, up to about £933 a year for a basic-rate parent.

How much does Tax-Free Childcare give?

The government tops up your childcare account by 25% of what you pay in, which equals 20% of the total cost, capped at £500 per child per quarter (£2,000 a year, or £4,000 for a disabled child). The cap is per child, so families with several children can gain more.

Which scheme is better for me?

Tax-Free Childcare usually wins for higher childcare bills and families with multiple children because the cap is per child. Vouchers can win for two working parents who both claim and have modest, single-child costs. You cannot use both at once.

UK Childcare Voucher & Tax-Free Childcare Calculator

UK parents face a choice between the closed legacy childcare voucher scheme and the current Tax-Free Childcare (TFC) scheme. This calculator estimates the saving under each so you can see which leaves you better off. You cannot use both at the same time.

How it works

Childcare vouchers are salary sacrifice, so the saving is the combined income-tax and National Insurance rate applied to the voucher amount, capped by your tax band. Tax-Free Childcare tops up your payments by 25% of what you put in, equal to 20% of the total cost, capped per child:

voucher_save = min(voucher_per_year, band_limit×12) × (tax_rate + NI_rate)
tfc_topup    = min(cost × 0.20, 2000 × children)

The tool reports both and highlights the larger saving.

Tips and notes

The voucher scheme is closed to new joiners, so this comparison is only relevant if you are already grandfathered into it. If two parents both qualify for vouchers, each can claim, roughly doubling the voucher saving. Tax-Free Childcare’s cap is per child, so larger families and higher childcare bills tend to favour TFC. Note that claiming Universal Credit childcare support, or being a higher earner over the £100,000 TFC eligibility limit, changes the picture. Confirm your eligibility on the official Childcare Choices service before switching, as the move out of vouchers is usually one-way.