Tax-Free Childcare: Paying for childcare

This section explains payments going out of the childcare account for childcare costs.

What childcare costs can be paid out of the childcare account?

Only payments in respect of qualifying childcare for the relevant child can be made from the account. If the claimant pays costs for more than one child, it is very important that they make sure that they are paying the correct costs out of the right account for each child. Money in an account for child one cannot be used to pay childcare costs for child two and vice versa, nor can money be transferred between childcare accounts.

It is important to be aware that the qualifying childcare test applies at the point the payment is made out of the account - not at the point at which any top-up is paid into the account.

What is qualifying childcare?

For the purposes of TFC, childcare means any form of care or supervised activity for a child that is not provided in the course of the child's compulsory education. However, for the childcare to be qualifying, there are two requirements:

What is registered or approved childcare?

The full definition of registered or approved childcare is contained in Regulation 3 of the Childcare Payments Regulations (note that this link goes to the original version and may not include any subsequent ammendments).

Childcare is not registered or approved if:

However, even if the childcare provider is registered or approved, payments cannot be made to them via the childcare account unless they have signed up to the scheme with HMRC.

What is the main reason test?

As explained above, the main reason, or one of the main reasons, for incurring the costs of the childcare must be to enable the person to work (or where the person has a partner, to enable both the person and the person's partner to work).

It is not clear yet to what extent HMRC will check this but claims could be subject to compliance checks. It is arguable, for the wording of the legislation, that as long as work is one of the main reasons (in other words, there might be other main reasons) then it should be fine, but again it is not clear how HMRC will interpret this – although the TFC manual published in 2023 gives some basic information which suggests that any direct or indirect link to work that requires childcare to enable a person to earn income would be acceptable as a main reason in terms of TFC eligibility.

HMRC also included some basic examples of how the tests work in their guidance (see Page 21 onwards). However, please note HMRC have withdrawn this official guidance as it is no longer being updated cannot be relied on to remain up to date. The information may still be useful background as it confirms that where someone has an unexpected change of circumstances, such as a job loss, they can continue to pay for childcare where had already been booked to allow them to work.

How are payments made to childcare providers?

Once claimants have set up their childcare account and have available funds, including the Government top-up contribution, paid in by HMRC, they can pay their childcare provider using their childcare account, via the GOV.UK website.

Claimants can identify their childcare provider in the TFC system by searching for the childcare provider's name, address, postcode and/or regulator reference.

Payments take at least 3 working days to reach the childcare provider. So it is important that plenty of time is allowed before the payment is due.

The childcare provider must be registered with TFC in order to receive their payment via TFC. There is separate guidance available for childcare providers on the GOV.UK website.

Last reviewed/updated 3 July 2024