Employer Supported Childcare

Employer Supported Childcare has been closed to new applicants since 4 October 2018, but existing users can continue to benefit from tax and National Insurance relief on childcare vouchers and directly contracted childcare. If you're already in the scheme, understanding how the exemptions work can help you maximise your savings. Workplace nurseries remain unaffected and are still available as a tax-free benefit.

What is Employer Supported Childcare?

Employer Supported Childcare was a scheme that allowed employers to provide childcare support to employees in a tax-efficient way. Although closed to new entrants from 4 October 2018, employees who were already registered by that date can continue using the scheme for as long as their employer offers it or they remain with that employer.

There are three types of employer supported childcare, each with different tax treatment:

• Employer-provided nurseries or playschemes (still open to all)
• Childcare vouchers (closed to new applicants)
• Directly contracted childcare (closed to new applicants)

If you're not already in the scheme, you may be able to access Tax-Free Childcare instead.

Employer-provided nursery or playscheme

Workplace nurseries remain completely exempt from Income Tax and National Insurance contributions (NICs), with no cash limit on the benefit. This exemption is still available to all employees and was not affected by the 2018 closure.

To qualify for full tax exemption, the nursery or playscheme must meet specific conditions:

• The employer must make premises available, either alone or jointly with others (such as other employers, voluntary bodies, or local authorities)
• Places must be offered to all employees, or all employees at the location where the scheme operates
• The facilities must comply with legal requirements for local authority registration
• The nursery cannot be provided on premises that are wholly or mainly used as a private dwelling

Making premises available means the employer uses existing freehold or leasehold property, or acquires premises specially by freehold, leasehold, or hiring suitable premises under licence (such as a local hall).

For jointly run nurseries, the employer must be wholly or partly responsible for both financing and managing the scheme. This means more than simply buying places from a commercial nursery. The employer must have a real role, including commitment to capital and funding, and close involvement in appointing staff, determining the extent and conditions of care, and allocating places.

Spare places in a qualifying nursery can be offered to people who aren't the employer's employees without affecting the tax position of existing employees.

Childcare vouchers

Childcare vouchers are closed to new applicants from 4 October 2018. However, if you joined a childcare voucher scheme before this date, you can continue to receive vouchers with tax and NIC relief up to the relevant exempt amount.

The exempt amount depends on when you joined the scheme:

If you joined before 6 April 2011:

• £55 per week, or
• £243 per month

If you joined on or after 6 April 2011:

The exempt amount depends on your income tax rate band:

| Income Tax Rate Band | Weekly exempt limit | Monthly exempt limit |

|---------------------|-------------------|---------------------|

| Basic rate | £55 | £243 |

| Higher rate | £28 | £124 |

| Additional rate | £25 | £110 |

Your employer must estimate your relevant earnings amount to determine which rate band applies to you. You should check the income tax rate bands for the current tax year (2025/26) to confirm the thresholds.

Important limitations:

• You're only entitled to one exempt amount in a tax week, regardless of how many employments you have
• If your employer provides both childcare vouchers and other employer-supported childcare in the same week (for example, £55 in vouchers plus £55 of after-school care), you can only claim one exempt amount of £55
• Any amount above the exempt limit is subject to tax and NICs
• If both you and your partner receive childcare vouchers, you're each entitled to your own exempt amount

For National Insurance purposes only, you can receive an exempt amount from more than one employer.

Other employer-supported childcare

The third type of support is where employers directly contract with a childcare provider on behalf of employees. This arrangement is also closed to new applicants from 4 October 2018.

For existing participants, the same exempt amounts apply as for childcare vouchers (detailed in the section above), depending on when you joined the scheme and your income tax rate band.

What happens if conditions aren't met?

If childcare vouchers or other childcare provision exceed the relevant exempt amount, only the excess is taxed and subject to NICs.

However, if childcare is provided that doesn't comply with the qualifying conditions at all, the entire value is taxed in full and liable to NICs.

Continuing with the scheme

If you're already registered for Employer Supported Childcare, you can continue for as long as:

• Your employer continues to offer the scheme, and
• You remain employed with that employer

If you leave your employer or your employer stops offering the scheme, you cannot rejoin Employer Supported Childcare with a new employer. You would need to consider alternative support such as Tax-Free Childcare.

Sources

• Employer Supported Childcare (480: Appendix 11)
• Income Tax rates and thresholds

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.