Is a workplace nursery scheme tax-free for childcare?

Full answer

Workplace nurseries are one of the most valuable, but least understood, childcare tax benefits available, because unlike Tax-Free Childcare or the now-closed-to-new-joiners childcare voucher scheme, there is no monetary cap on the tax and National Insurance exemption. **What qualifies as a workplace nursery** To qualify for the full exemption, the nursery must be run BY the employer (or jointly by several employers), or the employer must be wholly or partly responsible for financing and managing the provision -- simply subsidising fees at a nursery the employer has no operational or financial involvement in does not automatically qualify for this specific exemption; genuine partnership arrangements meeting HMRC's conditions are required. **Why the exemption is uncapped** Unlike childcare vouchers (capped at set amounts depending on your tax band, and closed to new entrants) or Tax-Free Childcare (a government top-up capped per child), a qualifying workplace nursery benefit has NO monetary limit -- the full value of the childcare provided is exempt from both Income Tax and National Insurance, regardless of how high the fees are. **Worked example** An employer runs an on-site nursery (or a qualifying joint scheme with a nearby provider) and an employee's child attends, with fees that would otherwise cost £15,000 a year privately. Because it meets the workplace nursery conditions, the FULL £15,000 value is exempt from tax and National Insurance for the employee, a considerably larger saving than would be possible through Tax-Free Childcare's capped government top-up. **Who typically offers this** Workplace nursery schemes are more common among larger employers (particularly in sectors like finance, higher education, and the NHS) with the scale to justify running or co-financing a nursery, and are less commonly available at small and medium employers who instead tend to support Tax-Free Childcare or similar arrangements. **Interaction with other childcare support** Using a qualifying workplace nursery does not prevent you from also using Tax-Free Childcare for OTHER childcare costs (such as a childminder or after-school club for an older child), though you cannot claim Tax-Free Childcare specifically for costs already covered by employer-provided childcare vouchers under the older scheme. **Practical tip** If your employer offers or is considering a workplace nursery partnership, check that it meets HMRC's specific ownership/financing conditions for the full exemption to apply, since a simple fee subsidy arrangement without genuine employer involvement in running or financing the nursery may not qualify for the same tax-free treatment.

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