Tax-Free Childcare Refunds and Withdrawals: What Happens to the Top-Up?

A refund from a childcare provider must go back to the childcare account that paid them. A withdrawal to your own bank account is different: the corresponding government top-up goes back to HMRC. You cannot withdraw the top-up as cash to keep.

Where should a nursery refund be paid?

HMRC's provider refund guidance requires the provider to refund from the bank account that received the original payment, back to the childcare account it came from. A refund to your personal bank account does not follow that process.

Give the provider the unique 13-digit childcare account number beginning with 1100, taken from your official account. This is different from the child reference used to match provider payments. Ask the provider to follow the current HMRC instructions rather than copying bank details from an old message.

How long does a provider refund take?

HMRC publishes up to 24 hours for a Faster Payment refund and three to five working days for a Bacs refund. It does not allow provider refunds by CHAPS or cheque. Ask which payment method the provider used, and check the account once the expected window has passed. If the refund is missing, confirm the date, amount and reference with the provider before contacting the Childcare Service.

Can I withdraw unused money?

HMRC's withdrawal rules return the corresponding top-up to HMRC when you take money out. At the normal top-up rate, the amount available to you is up to 80% of the account balance. A withdrawal cannot be made while a top-up payment is payable into the account.

Worked example: taking back an unused £500 balance

Imagine you deposited £400 and received a £100 top-up, with none of the £500 spent. If you withdraw that full balance, £400 returns to you and £100 returns to HMRC. This illustrates why the combined balance is not all available as personal cash. Check the amount shown by the official service before confirming a withdrawal.

How does a refund change the next deposit?

A cleared refund leaves money in the childcare account that may cover part of a later eligible bill. Use the updated available balance in the calculator rather than depositing 80% of the new invoice automatically.

For example, assume your next bill is £700 and the account shows £200 available after a refund. You need £500 more. With enough top-up allowance left, a £400 deposit and £100 top-up cover that gap. If only £40 of top-up allowance remains, you need to deposit £460 instead. These are our worked examples, not an HMRC account statement.

Enter the current balance and government contribution used in the calculator. After a refund or withdrawal, check the official allowance shown in the account; do not assume moving money out has reset the quarterly limit.

What if my child leaves nursery?

First ask for a final statement showing any fees still owed and any refund due. If the child will use another eligible provider, check that provider's Tax-Free Childcare registration before arranging future payments. If you want your unused money back, read the withdrawal amount in the official account and remember the associated top-up goes back to HMRC.

For siblings, return a provider refund to the original child's account. Our guide to accounts for two or more children explains why each child's payments should be kept separate.

Check before requesting a refund or withdrawal

• Agree the refund amount with the provider and keep the revised invoice.
• Distinguish a provider refund back into the childcare account from a personal withdrawal out of it.
• Wait for pending transactions to clear before calculating a new deposit.
• Use GOV.UK account sign-in to check the balance and withdrawal details.
• If money went to the wrong destination, contact the provider and Childcare Service for instructions.