Both are government-backed ways to reduce childcare costs, but they work very differently, and for higher earners the gap is significant. If you earn above £100,000, Tax-Free Childcare (TFC) excludes you entirely. The Feel The Benefit Workplace Nursery Scheme saves up to 56.3% of fees in the highest-rate band, versus TFC’s flat and capped 20%. Here is an honest, side-by-side comparison so you can see exactly where you stand.
Workplace Nursery Scheme vs Tax-Free Childcare
Which saves UK parents more?
How much could you save?
Enter your annual salary and monthly nursery fees. If you earn above £100,000, Tax-Free Childcare excludes you entirely; the Salary Sacrifice Nursery Scheme from Feel The Benefit has no income ceiling. Figures use 2026/27 tax rates.
Annual saving: £1,300/month nursery fees
£
£
£45,000 salary · £1,300/month in nursery fees
Feel The Benefit
Feel The Benefit
£477 save per year more with Feel The Benefit vs TFC’s £2,000 cap; advantage grows as fees rise
No annual cap
Save on every pound. TFC stops at £2,000 per child per year.
No income limit
Eligible above £100k. TFC excludes you.
Single earner OK
One income qualifies. TFC needs both.
Two ways to save on childcare costs
Workplace Nursery Scheme
Pay nursery fees through salary sacrifice, deducted from gross pay before Income Tax and National Insurance. Employees can save up to 56% of nursery fees; the higher the tax rate, the greater the saving. No annual cap. Feel The Benefit handles all the administration.
- Saving based on your full tax rate, not a flat top-up
- No cap on annual saving
- Set up once; runs for the contract period
- Earners in the £100k–£125k taper band: up to 56.3% saving
Tax-Free Childcare
For every £8 you deposit into an HMRC childcare account, the government adds £2, a flat 20% saving. Capped at £2,000 per child per year. Applied directly via gov.uk; no employer required.
- 20% top-up, capped at £2,000 / child / year
- Both parents must be in work
- Reconfirm eligibility every 3 months or lose access
How they compare
| Feel The Benefit | Tax-Free Childcare | |
|---|---|---|
| Annual saving cap | None: save on every pound | £2,000/child (£4,000 if disabled) |
| Saving rate | up to 56% of total fees | 20% top-up on what you deposit |
| Parent income ceiling | None: all incomes eligible | Excluded if either parent earns over £100k |
| Working requirement | Single income households qualify | Both parents must work 16+ hrs/week |
| Reconfirmation | None: set up once, runs to term | Every 3 months or account suspended |
| Universal Credit compatible | May be: check with employer | Mutually exclusive |
| Child age range | Nursery age | Birth to age 11 (16 if disabled) |
| After-school & holiday clubs | Not covered | Covered |
| Self-employed parents | Not available | Available |
| Setup | Through employer (we manage it) | Direct with HMRC |
Saving estimates are illustrative. Actual figures depend on salary, tax code, contract length, and nursery fees. Use our employee savings calculator for a personalised estimate.
The numbers that matter
How the Workplace Nursery Scheme compares with Tax-Free Childcare across the UK tax bands � at a glance.
33%
Typical net saving for higher-rate taxpayers (�50,270��100,000) on nursery fees.
56%
Peak net saving for additional-rate earners inside the �100k��125,140 Personal Allowance taper.
�2,000
Annual Tax-Free Childcare cap � the maximum top-up TFC will ever pay per child, per year.
�100k+
Earners above �100,000 are excluded from TFC entirely � and save the most on the Workplace Nursery Scheme.
62%
The hidden tax trap in the taper band � and exactly why the scheme saves so much there.
High Income Reality
Earn over £100,000? TFC is closed to you.
The Workplace Nursery Scheme has no income ceiling — and savings peak inside the £100k–£125k taper band.
See high earner savings →
Higher-Rate Taxpayers
Save up to 33% on nursery fees
Net saving after fees for earners £50,270–£100,000 using the Workplace Nursery Scheme — well above the flat 20% from Tax-Free Childcare.
High Earners (�100k��125,140)
Save up to 56.3% on nursery fees
The Personal Allowance taper creates a 62% effective tax rate — making this the highest-saving band in the UK tax system. TFC is closed to you; this scheme is wide open.
Tax-Free Childcare: the detail
If Tax-Free Childcare looks like the right route for you, here is exactly what HMRC will and won't accept, and the eligibility rules that catch most families out.
Eligibility
Who can, and who can't, claim Tax-Free Childcare (TFC)
You can qualify for TFC if all of these are true
- Both parents work at least 16 hrs/week at minimum wage (or the working parent does, if a single-parent household)
- Neither parent's adjusted net income exceeds £100,000
- Your child is under 12 (under 17 if disabled)
- You're not claiming Universal Credit, Working/Child Tax Credit, or childcare vouchers
You don't qualify if any of these apply
- Either parent's adjusted net income exceeds £100,000 in the relevant tax year; the household is excluded entirely, even if the other parent earns far below.
- Currently claiming Universal Credit, Working Tax Credit or Child Tax Credit; or still inside a childcare voucher scheme (you have 3 months to leave it after applying).
- Either parent isn't working, unless on parental leave, disabled, or an unpaid carer (in which case the working parent must still meet the earnings test).
- Either working parent earns less than the equivalent of 16 hrs/week at National Minimum Wage (around £2,540 per quarter for workers aged 21+ in 2025/26).
- The child is 11+ as of the September after their birthday (16+ if disabled).
Excluded from TFC? The Workplace Nursery Scheme may apply
The Workplace Nursery Scheme (salary sacrifice nursery scheme) is set up through your employer and has no income ceiling. Single-income households qualify too. For standard higher-rate taxpayers, net savings are typically up to 33% of nursery fees (around 42% gross tax/NI relief before management fee).
Calculate your saving →What TFC pays for
What TFC funds and doesn't
TFC pays for childcare, not education. The line between the two is where many families get caught out.
Pays for
- Registered nurseries and childminders
- Approved home childcarers (nannies registered with a childcare agency)
- Breakfast clubs and after-school clubs run by a registered provider (at school or nursery premises)
- Holiday clubs and play schemes run by registered providers, including nursery-based play schemes
Does not pay for
- Private school tuition fees: counted as education, not childcare.
- School uniforms or school clothing costs.
- School meals billed separately from a childcare package (rather than as part of wraparound care).
- School trips or educational excursions.
- Tutoring or private tuition: even where provided by a qualified teacher.
The Threshold
When does the Workplace Nursery Scheme beat Tax-Free Childcare?
It is only fair to be upfront, and the answer depends on your tax rate.
Earners above £100,000 are excluded from Tax-Free Childcare entirely. The Workplace Nursery Scheme has no income ceiling; for these families it is the only scheme available, and the saving is substantial. Earners in the £100,000–£125,140 Personal Allowance taper band face a 60% effective tax rate, enabling savings of up to 56.3% of nursery fees.
For a higher-rate taxpayer (above ~£50,270), the Workplace Nursery Scheme saves roughly 33% of total fees at every level, well beyond TFC’s capped 20%. At £1,200/month fees, a higher-rate earner saves £4,795/year versus TFC’s £2,000 cap.
For a basic-rate taxpayer (20% IT + 8% NI), the Workplace Nursery Scheme only beats TFC once monthly fees exceed approximately £970. Below that level, TFC’s flat 20% top-up wins because the scheme includes a ~15% management fee, leaving a net saving of ~17%, less than TFC’s 20% while it remains uncapped.
Above ~£970/month, TFC hits its £2,000/year cap and stays there. The Workplace Nursery Scheme has no cap; the saving grows with every extra pound of fees.
Example Savings
How the savings compare at different fee levels
The table below shows the actual net saving through the Workplace Nursery Scheme compared to TFC across a range of fee levels. Drag the slider to see how figures change at different salaries. Management fee at 15% is included in the Feel The Benefit column.
Salary £50,000 basic rate
| Monthly fees | Feel the Benefit (FTB) net saving (basic-rate, after mgmt fee) | Tax-Free Childcare (TFC) saving | Winner |
|---|---|---|---|
| £300/month | £619/yr ~£52/month | £720/yr TFC uncapped here | TFC saves you £101 |
| £600/month | £1,238/yr ~£103/month | £1,440/yr | TFC saves you £202 |
| £833/month | £1,719/yr ~£143/month | £1,999/yr cap almost reached | TFC saves you £280 |
| ~£970/month | ~£2,002/yr ~£167/month | ~£2,000/yr capped | Break-even |
| £1,000/month | £2,064/yr ~£172/month | £2,000/yr capped | saves you £64 |
| £1,200/month | £2,477/yr ~£206/month | £2,000/yr capped | saves you £477 |
| £1,220/month typical UK rate | £2,518/yr ~£210/month | £2,000/yr capped | saves you £518 |
| £1,500/month | £3,096/yr ~£258/month | £2,000/yr capped | saves you £1,096 |
| £1,587/month typical London rate | £3,276/yr ~£273/month | £2,000/yr capped | saves you £1,276 |
| £1,800/month | £3,715/yr ~£310/month | £2,000/yr capped | saves you £1,715 |
| £2,000/month | £4,128/yr ~£344/month | £2,000/yr capped | saves you £2,128 |
| £2,200/month | £4,539/yr ~£378/month | £2,000/yr capped | saves you £2,539 |
| £2,500/month | £5,158/yr ~£430/month | £2,000/yr capped | saves you £3,158 |
| £3,000/month | £6,190/yr ~£516/month | £2,000/yr capped | saves you £4,190 |
Warning: Salary sacrifice cannot reduce your take-home pay below the National Minimum Wage. Your employer is responsible for applying this limit before processing any arrangement.
The TFC Cap
TFC stops here. We don’t.
The Workplace Nursery Scheme has no annual cap, so every extra pound of fees keeps generating tax and NI relief.
Where FTB Wins
Where the Workplace Nursery Scheme delivers the most value
The Workplace Nursery Scheme is clearly the better choice for families in any of the following situations:
Earners over £100,000: entirely excluded from Tax-Free Childcare (TFC); the Workplace Nursery Scheme has no income ceiling. Earners in the £100k–£125k Personal Allowance taper band can save up to 56.3% of nursery fees.
Higher-rate taxpayers (above ~£50,270): net saving up to 33% of fees through salary sacrifice (around 42% gross tax/NI relief before management fee), versus TFC’s flat and capped 20%.
Basic-rate taxpayers where fees are moderate relative to salary: once fees pass TFC’s £2,000/yr cap the scheme can pull ahead, but the crossover depends on salary too — at lower incomes (~£32k) heavy salary sacrifice erodes the personal allowance and TFC can remain the better option even at higher fee levels. Use the savings calculator to check your specific figures.
Single-income households: TFC usually requires both parents to be working. The Workplace Nursery Scheme has no such requirement.
Families on long or multi-term contracts: without a cap, every month of fees generates the same proportional saving.
Families already claiming Universal Credit: TFC and UC cannot be used together. If you are already on UC, the scheme may still be available through your employer.
The Numbers
The difference at higher income levels
At a basic-rate income (£35,000 salary, £1,000/month fees), both schemes deliver similar annual savings of around £2,000. But once fees exceed the TFC cap threshold, or once the parent earns enough to reach the higher-rate tax band, the advantage compounds.
A higher-rate taxpayer paying £1,500/month in nursery fees could save over £3,500 per year more through the Workplace Nursery Scheme than through TFC, in addition to potentially qualifying for child benefit restoration if their taxable salary drops below the relevant threshold.
Read more about the child benefit double-advantage in our related article: How to Qualify for Child Benefit Through Salary Sacrifice.
To see figures for your specific salary, nursery fees, and tax code, use our employee savings calculator.
TFC is better for some
When Tax-Free Childcare may suit you better
We want to give you genuinely useful guidance, which means being straightforward about when Tax-Free Childcare is the more practical or financially appropriate option:
You are self-employed. The Workplace Nursery Scheme requires an employer; if you run your own business as a sole trader or through a limited company without a PAYE payroll, TFC is the straightforward alternative.
Your employer does not currently offer the scheme and is unlikely to set it up. Both schemes are worth pursuing, but if employer engagement is not feasible, TFC provides immediate direct access.
Your child is school-age (5 to 11). Once your child leaves nursery, the Workplace Nursery Scheme no longer applies. TFC continues to cover breakfast clubs, after-school clubs, and holiday camps right up to age 11.
You earn under £50,270 (basic-rate taxpayer). At basic rate, the Workplace Nursery Scheme’s net saving after the management fee is more marginal — roughly 17–20% of fees — and TFC’s flat 20% top-up can match or beat it, especially at lower fee levels or lower salaries. Use the savings calculator to compare your specific numbers before committing.
You are a very low earner below the Income Tax threshold. Salary sacrifice only saves National Insurance at this income level. Tax-Free Childcare still provides a flat 20% top-up regardless of income, which may be more valuable to you.
In Summary
Which scheme should you choose?
For most higher-rate taxpayers, and for basic-rate taxpayers paying over ~£970/month in nursery fees whose employer participates in the Workplace Nursery Scheme, the Feel The Benefit scheme will deliver a greater financial saving than Tax-Free Childcare (TFC), often significantly so at higher incomes or fees.
TFC is a valuable fallback, and in some circumstances the right primary choice, particularly for self-employed parents, those with school-age children, and families whose employer has not yet set up a scheme.
The two schemes cannot be used at the same time for the same child. If you currently use TFC for nursery fees and your employer offers the Workplace Nursery Scheme, it is worth running the numbers; the salary sacrifice saving may be materially larger than the 20% TFC top-up.
Use our calculator to see your personal figures, or speak to us if you would like your employer to explore setting up a scheme.
Break-Even Point
Basic-rate crossover sits around £970 / month.
Below this fee level TFC can win. Above it — or once you hit higher-rate tax — the Workplace Nursery Scheme pulls ahead and keeps pulling.
Run your numbers →Which one fits you?
Most save more here
Workplace Nursery Scheme is for you if
- You're employed and your child is in nursery
- You pay around £800+ a month in nursery fees
- Your employer is willing to run a scheme (it's free to set up)
Tax-Free Childcare is for you if
- You're self-employed
- You need cover for after-school or holiday clubs
- Your employer can't or won't run a workplace nursery scheme
See your personal saving in 2 clicks
No account needed. Takes under a minute.
Frequently asked questions
It depends on your salary. For a basic-rate taxpayer on £45,000 paying £1,200/month, the Workplace Nursery Scheme saves around £2,477 per year versus Tax-Free Childcare’s £2,000 cap. For a higher-rate earner on £75,000, the saving rises to around £4,795/year. Earners above £100,000 are excluded from Tax-Free Childcare entirely; the Workplace Nursery Scheme has no income ceiling.
No. The two schemes cannot be used for the same child at the same time. You choose whichever saves you more. For most families paying typical UK nursery fees, the Workplace Nursery Scheme is significantly more generous.
Yes. There is no income limit on the Workplace Nursery Scheme. This is one of the biggest differences from Tax-Free Childcare, which excludes families where either parent earns above £100,000.
No. The Workplace Nursery Scheme requires an employer to set up a formal arrangement with a qualifying nursery. Self-employed parents should use Tax-Free Childcare instead.
Yes. Tax-Free Childcare covers registered after-school clubs, holiday camps and childminders up to a child's 11th birthday (16th if disabled). The Workplace Nursery Scheme covers only nursery placements at a qualifying nursery, typically for children aged 0-4.
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