How to pay for childcare: Tax-Free Childcare and Universal Credit explained
Both of our settings are Ofsted registered, which means parents can use government childcare support to cover our fees. Here is how the two main schemes work.
Because LSC Childcare is registered with Ofsted, our fees count as qualifying childcare. That opens up two main ways for working parents to get help with the cost.
Tax-Free Childcare
You open an online childcare account on GOV.UK and pay money in. For every £8 you pay in, the government adds £2, up to £2,000 per child per year (£4,000 for a child with a disability). You then pay us directly from that account.
- Available to most working parents, including the self-employed, earning at least the minimum-wage equivalent of 16 hours a week.
- Not available if either parent earns over £100,000 a year or if you claim Universal Credit.
- Works for children up to 11 (16 if disabled).
Universal Credit childcare element
If you claim Universal Credit and you (and your partner, if you have one) are working, you can claim back up to 85% of your childcare costs each month, up to a monthly cap set by the government. For 2025/26 the caps are roughly £1,030 for one child and £1,770 for two or more; check GOV.UK for the current figures.
- You report what you have paid in your UC journal each assessment period and the money is added to your next payment.
- You will need receipts showing the dates and amounts. We can provide these for every assessment period: just ask.
Which one should I use?
You cannot use both at the same time. As a rule of thumb, Universal Credit usually pays more if you are eligible for it; Tax-Free Childcare suits parents who are not on UC. The government’s childcare calculator will tell you which leaves you better off.
If you are unsure what paperwork you need from us, give the setting a call and we will sort it out.
