Comparison · Childcare · 2026
Workplace Nursery Scheme vs Tax-Free Childcare UK 2026
A qualifying Workplace Nursery scheme offers an uncapped tax and National Insurance exemption through your employer, while Tax-Free Childcare gives a capped government top-up available to any eligible working parent. Which is worth more depends on your income, your employer, and your childcare provider. Here is how they compare for 2026/27.
TL;DR - 30-Second Summary
- - Workplace Nursery: full income tax + NI exemption, no annual cap, no income limit, but employer must offer a qualifying scheme
- - Tax-Free Childcare: £2 government top-up per £8 paid in, capped at £2,000/child/year (£4,000 if disabled), income limit £100,000 adjusted net income
- - Cannot double-claim for the same childcare costs under both schemes
Side by Side: Workplace Nursery vs Tax-Free Childcare
| Feature | Workplace Nursery | Tax-Free Childcare |
|---|---|---|
| Type of benefit | Full income tax + NI exemption | Government top-up (25%) |
| Annual cap | None | £2,000/child (£4,000 disabled) |
| Income limit | None | £100,000 adjusted net income per parent |
| Depends on employer offering it | Yes, employer must set up qualifying scheme | No, apply directly regardless of employer |
| Applies to which providers | Only the qualifying workplace nursery | Any registered childcare provider |
| Best suited to | Higher earners with access to a qualifying scheme | Most working parents under the income limit |
What Is a Workplace Nursery Scheme?
A Workplace Nursery scheme is a specific HMRC exemption that applies when an employer is "wholly or partly responsible for financing and managing" a nursery — either an on-site nursery or a qualifying commercial partnership structure. Where the conditions are met, the value of the nursery place provided is completely exempt from income tax and National Insurance for the employee, with no fixed monetary limit.
Because there is no cap, this can be extremely valuable for higher earners with significant nursery fees, especially those who would otherwise be excluded from Tax-Free Childcare by the £100,000 income limit.
What Is Tax-Free Childcare?
Tax-Free Childcare is a government top-up scheme available to most working parents, regardless of employer. For every £8 you deposit into an online childcare account, the government adds £2, up to a maximum top-up of £2,000 per child per year (£4,000 for a disabled child up to age 17), which can then be used to pay any registered childcare provider.
Both parents (or the sole parent in a single-parent household) must each expect to earn at least the equivalent of 16 hours a week at the National Living Wage, and neither can have adjusted net income above £100,000 in the tax year.
Who Should Choose What?
- - Your employer offers a qualifying scheme
- - You or your partner earn over £100,000 (excluded from Tax-Free Childcare)
- - Your nursery fees are high enough that an uncapped exemption is more valuable
- - Your employer does not offer a Workplace Nursery scheme
- - Both parents earn under £100,000 adjusted net income
- - You use a childminder, after-school club or nursery outside a workplace scheme