Childcare Vouchers: What You Need to Know in 2026

Childcare vouchers were, for many years, the primary mechanism through which the government supported working parents with the cost of childcare. They allowed employees to receive a portion of their salary in the form of vouchers (which were exempt from income tax and National Insurance contributions) to be used against registered childcare costs. The scheme was straightforward and popular, and at its peak was used by several hundred thousand families across the UK.

The scheme closed to new entrants on 4 October 2018, when it was superseded by Tax-Free Childcare for new claimants. Parents and employers who were already participating in the scheme before this date were protected: they could continue to receive and issue vouchers indefinitely, as long as their employment circumstances remained broadly the same. As of 2024, the scheme is being wound down gradually as the existing cohort of participants transitions (voluntarily or through changed circumstances) out of it. New employees and new parents cannot join the scheme.

How the Voucher Scheme Worked

Under the employer-supported childcare scheme, an employee arranged with their employer to receive a portion of their gross salary in the form of childcare vouchers rather than cash. Because this amount was taken from salary before tax and National Insurance contributions were calculated, neither the employer nor the employee paid tax or National Insurance on the amount. The value of the tax and NI saving depended on the employee’s marginal tax rate and the rate of Employer National Insurance Contributions.

The maximum amount that could be taken in vouchers each month was £243 for a basic rate taxpayer (20% income tax), £124 for a higher rate taxpayer (40%) and £110 for an additional rate taxpayer (45%). These limits were set at levels that equalised the benefit across tax rates – each rate pays a different amount in vouchers but saves approximately the same in tax. The maximum annual saving for a basic rate taxpayer was therefore approximately £930 (tax and employee NI), plus whatever savings arose from the employer NI exemption.

Registered Providers and How to Use Vouchers

Childcare vouchers could only be used with registered childcare providers (nurseries, childminders, after-school clubs, holiday clubs and nannies registered with Ofsted (or their equivalent in Scotland, Wales and Northern Ireland)) who had signed up with the voucher provider. The major voucher providers (Edenred (formerly Accor Services), Computershare, Sodexo, Busy Bees Benefits and others) operated the accounts on behalf of employers and issued vouchers (now typically as electronic accounts or payment cards rather than paper vouchers).

For parents still on the voucher scheme, the process involves:

• checking with their employer that the scheme is still active
• contacting the voucher provider to confirm their account is live
• providing the childcare setting with the voucher provider’s name and the relevant payment details
• then making regular payments from their voucher account directly to the provider. Not all providers accept all voucher types –
• parents should check with their setting that their specific voucher can be accepted

Vouchers vs Tax-Free Childcare: Which Is Better?

For families who are still on the legacy voucher scheme, the question of whether to switch to Tax-Free Childcare is important and the answer is not always obvious. TFC provides a flat 25% top-up (up to £2,000 per year per child). The voucher scheme provides a saving that depends on tax and NI rates. For a basic rate taxpayer with one child spending at least £9,200 per year on childcare, TFC will generally provide a larger benefit. For higher and additional rate taxpayers (particularly those on the legacy scheme who were on those higher rates when they joined) vouchers may still provide greater savings, because the maximum monthly voucher amount is the same regardless of the taxpayer’s current rate, but the NI saving is calculated at the full rate.

The government provides an online comparison tool on the Childcare Choices website that allows families to input their specific circumstances and see which scheme provides the larger benefit. Because the comparison depends on individual tax rates, salary sacrifice arrangements and childcare costs, it is worth spending 10 minutes on this tool before making a decision. The most important point is that switching from vouchers to TFC is a one-way door – once a parent leaves the voucher scheme, they cannot return.

Interaction With Other Entitlements

Childcare vouchers can be used alongside the 15-hour and 30-hour funded entitlements – the vouchers can pay for hours beyond the funded entitlement, for meals, or for other registered childcare not covered by the entitlement. However, childcare vouchers cannot be used at the same time as Tax-Free Childcare from the same employer. If you switch to TFC, your employer must cease issuing vouchers to you. If both parents are in employment, the relevant employer is each parent’s own employer – so one parent could theoretically receive vouchers from their employer while the other parent has TFC, but in practice this is unlikely to be beneficial and is administratively complicated.

Universal Credit claimants cannot use childcare vouchers to claim the childcare cost element of Universal Credit. Parents receiving Universal Credit who also receive childcare vouchers must choose which support to use. Given the structure of the Universal Credit childcare element (85% of eligible costs), TFC is generally more beneficial for UC claimants than vouchers, and parents in this situation should seek advice from their Jobcentre Plus work coach or a benefits adviser.