Childcare vouchers closed to new joiners in 2018 but still pay if you're in a scheme. Here's how they compare to Tax-Free Childcare, with 2026/27 numbers.
If you have children in nursery or after-school club and you started your job before late 2018, there is a decent chance a small amount is quietly leaving your gross pay every month for childcare vouchers. There is an equally decent chance nobody has ever checked whether that is still the best deal available to you.
It might not be. The rules changed, the alternative scheme scales differently, and the switch between them is a one-way door. Here is how the two schemes actually compare on 2026/27 numbers.
Your employer takes an agreed amount out of your gross pay, gives you vouchers of the same value to spend on registered childcare, and that slice never gets taxed or charged National Insurance.
It is a salary sacrifice arrangement, the same mechanism behind pension sacrifice and cycle-to-work. Because the money comes out before tax, the saving is whatever your marginal tax and NI rates add up to.
The scheme closed to new applicants on 4 October 2018. According to GOV.UK, you can keep getting them only if your wages were adjusted on or before that date, you stay with the same employer and they keep running the scheme, and you do not take an unpaid career break of longer than a year.
That last set of conditions matters more than most people realise. Change employer and the arrangement is gone for good.
The exempt amount depends on your tax band and on when you joined. If you applied before 6 April 2011, the limit is £55 a week, or £243 a month, whatever you earn. If you joined on or after that date, HMRC’s basic earnings assessment sets your limit by band:
| Rate of Income Tax | Weekly limit | Monthly limit |
|---|---|---|
| Basic | £55 | £243 |
| Higher | £28 | £124 |
| Additional | £25 | £110 |
Worked example. You are a basic-rate taxpayer on tax code 1257L, earning £34,000, taking the full £243 a month in vouchers.
Now the bit people miss. The limit is per parent, not per household. If both of you were in voucher schemes before October 2018 and both pay basic rate, you are looking at roughly £1,633 a year between you. That is the number to beat.
A higher-rate parent who joined after April 2011 does worse than you might expect. £124 a month is £1,488 a year, saved at 40 per cent tax plus 2 per cent NI above the upper earnings limit, so about £625. A higher-rate parent who joined before April 2011 keeps the full £243 monthly allowance and saves about £1,225, which is the single best outcome the scheme offers.
Tax-Free Childcare is not a payroll deduction at all. You open a childcare account, pay money in, and the government adds 20 per cent on top. For every £8 you put in, government adds £2.
The cap is £500 every three months per child, up to £2,000 a year. For a disabled child it rises to £1,000 a quarter, up to £4,000 a year. To collect the full £2,000 you would need to spend £10,000 on that child’s childcare in a year, which is realistic for full-time nursery in most of England and not realistic for two afternoons of childminder.
Eligibility is stricter than vouchers were:
The £100,000 cliff edge is brutal and worth naming. A bonus that pushes you from £99,000 to £101,000 costs you the entire scheme, which is one of the better arguments for a pension sacrifice that brings adjusted net income back under the line.
Keep what you have if any of these apply.
Only one of you is working. Tax-Free Childcare requires both parents to meet the minimum earnings test. Vouchers do not care what your partner does. If one of you is at home, studying, or between jobs, vouchers are the only one of the two schemes still paying you.
Either of you earns over £100,000. You are locked out of Tax-Free Childcare entirely. Vouchers have no upper income limit.
Your childcare bill is modest. Because Tax-Free Childcare pays a percentage and vouchers pay a flat amount, there is a crossover point. For a single basic-rate parent saving £816 on vouchers, Tax-Free Childcare only wins once you spend more than about £4,080 a year, roughly £340 a month. For a two-parent household saving £1,633 on vouchers, the crossover is around £8,170 a year, roughly £680 a month.
Your children are older than 11. Tax-Free Childcare stops the September after your child turns 11. Voucher schemes keep running for approved childcare beyond that point, so a family using holiday clubs for a 13 year old has an obvious answer.
You have two or more children. This is the big one. The voucher limit is per parent. The Tax-Free Childcare cap is per child. Two children in nursery at £700 a month each is £16,800 a year, which collects the full £2,000 for each child, so £4,000 against a maximum voucher saving of £1,633. It is not close.
Your bill is above the crossover and rising. Nursery fees have moved faster than the frozen voucher limits, which have not changed since 2011. The £55 weekly cap buys much less than it did.
You are self-employed, or about to be. Vouchers are an employment benefit. Tax-Free Childcare works for the self-employed, and if you started your business less than 12 months ago the minimum earnings test does not apply at all.
You are changing jobs anyway. Your voucher scheme will not survive the move. You may as well plan the switch rather than discover it in your first payslip.
Three steps, in this order.
Then the warning. Applying for Tax-Free Childcare is irreversible. Once your application succeeds you must tell your employer within 90 days, they stop issuing new vouchers, and you cannot rejoin the scheme. Existing vouchers stay valid with no expiry, and you can combine them with Tax-Free Childcare payments to the same provider, but the tap is off permanently.
Here is what I would check first: whether your household circumstances are stable. If one of you might stop working in the next couple of years, the flexibility of vouchers is worth more than a marginal saving today.
The voucher limits did not move. They have been £55, £28 and £25 a week since April 2011, so 15 years of fee inflation has eaten most of their real value. Nothing in the 2026/27 tax year changed that.
Tax-Free Childcare caps also held at £500 a quarter per child. What did shift is the minimum earnings threshold, which tracks the National Minimum Wage, so the figure you were quoted when you applied is not the figure you are tested against now. That is worth knowing at your quarterly reconfirmation, particularly if your hours dropped.
The wider change is the expansion of funded childcare hours for working parents, which sits alongside Tax-Free Childcare rather than replacing it. You can use both. Many parents now find funded hours cover the bulk of the week and Tax-Free Childcare handles the rest, which shrinks the paid bill and can push a household back below the crossover point where vouchers were better all along. Worth recalculating rather than assuming.
If you want to see what dropping £243 a month into a salary sacrifice does to your actual take-home pay, the NetPay app shows the before and after, including tax, National Insurance, pension and student loan. Free to download.
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Only if you were already in a scheme. Employer childcare voucher schemes closed to new applicants on 4 October 2018. If you joined on or before that date, had your wages adjusted by then, and you have stayed with the same employer, you can keep getting vouchers. Everyone else has to use Tax-Free Childcare instead.
It depends on how much childcare you buy and how many children you have. Tax-Free Childcare pays 20 per cent of your costs up to £2,000 per child a year, so it scales with your bill. Vouchers give a flat saving of roughly £816 a year per basic-rate parent. Two children in nursery usually favours Tax-Free Childcare. One child and modest costs, with both parents in voucher schemes, often favours vouchers.
No. If you successfully apply for Tax-Free Childcare you must tell your employer within 90 days and they will stop issuing new vouchers. You can still spend vouchers you already hold, and there is no deadline for using them, but you cannot rejoin the voucher scheme afterwards.
You lose them. The exemption only survives while you stay with the same employer running the same scheme. Move to a new employer and you cannot join a new voucher scheme, because they have been closed to new entrants since October 2018. Factor that into any job move while your children are young.
Want to see your actual take-home pay?
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A note on financial advice: NetPay UK calculates take-home pay based on official HMRC tax rules. This article reflects rules in force at the time of publication (8 September 2026). Tax rules change. For complex situations, consult a qualified UK accountant or visit gov.uk/income-tax.
