Tax-Free Childcare for the Self-Employed: Eligibility and Proof of Income

Self-employed parents can use Tax-Free Childcare. Newly established businesses can qualify without reaching the normal earnings minimum, while established businesses can sometimes use expected annual income when earnings fluctuate.

What does the start-up exception mean?

If your business began less than 12 months ago, low earnings do not by themselves prevent eligibility. HMRC’s start-up rules give 12 months of relief from the normal work condition from the first qualifying declaration made within that start-up period, covering that declaration and the next three reconfirmations. Other eligibility requirements still apply.

The exception applies to the newly self-employed parent. It does not automatically remove a partner’s work requirements. There are restrictions on using another start-up period, so ask HMRC if you have relied on this exception before.

How much must an established business earn?

For someone aged 21 or over, the normal 2026/27 minimum is £2,643.68 over the next three months. Lower age-based thresholds apply. If you are self-employed and expect a quieter quarter, you can use average expected income over the current tax year. Read the current earnings and eligibility rules.

Does turnover count as income?

HMRC’s expected-income guidance uses expected business receipts less allowable business expenses, with specific treatment for capital items and partnerships. Do not treat your total invoice value as personal earnings.

Our simplified example: expected receipts of £15,000 less £4,000 of allowable non-capital expenses leave £11,000. For someone aged 21 or over using a full-year average, that is £2,750 per quarter. Keep the underlying forecast and ask HMRC or your accountant about expenses that need different treatment.

What evidence should I keep?

• Your Unique Taxpayer Reference and the date the business started.
• Invoices, contracts, receipts and business bank statements supporting your forecast.
• An explanation of seasonal work, expenses and any changes since the last declaration.

Use the official application and respond to any evidence request from HMRC. If you operate through a limited company, follow its separate company-director evidence instructions rather than assuming the sole-trader calculation applies.

What should I check every three months?

Reconfirm on time, review the forecast and report changes. Neither parent’s expected adjusted net income may exceed £100,000 for the tax year. The child, provider and residence rules also need to be met. Starting a business does not create an automatic right to top-ups.

Once eligible, use the provider bill and available account balance in our calculator. Our parental-leave guide covers another common change in circumstances.