When is workplace nursery support exempt from Income Tax and National Insurance?
By Katharine, Founder, EMBR Tax
Last updated for the 2026/27 tax year · 12 July 2026
What are workplace nursery schemes?
Where the HMRC conditions are met, workplace nursery support is fully exempt from Income Tax and National Insurance — and unlike Tax-Free Childcare, there is no £100,000 income limit and no annual cap. That combination can make it one of the most valuable childcare benefits available to higher earners, but only genuinely qualifying schemes get the exemption.
Why can they be so valuable when the rules are met?
Where the rules are met, qualifying workplace nursery support can be exempt from tax and National Insurance. That is what makes it stand out.
Why it can be so valuable:
- It can be exempt from Income Tax and National Insurance if HMRC conditions are met
- It can be more valuable than people expect compared with standard childcare spending
- It may sit alongside other childcare planning decisions in a useful way
As an illustration, a higher-rate taxpayer putting £10,000 of nursery fees through a qualifying scheme could save around £4,200 a year in Income Tax and National Insurance at 2026/27 rates.
What do people often miss about the qualifying conditions?
Not every nursery arrangement through work will qualify. The exemption depends on the structure meeting HMRC rules, so this is an area where assumptions can be risky.
What is the bottom line?
If your employer offers workplace nursery support, it is worth understanding exactly how it works. Done properly, it can be one of the more generous childcare-related benefits available.
Frequently asked questions
What makes workplace nursery support valuable?+
Where the rules are met, qualifying workplace nursery support can be exempt from tax and National Insurance. That is what makes it stand out compared with other childcare spending.
Does every nursery arrangement through work qualify for the exemption?+
No. Not every nursery arrangement through work will qualify. The exemption depends on the structure meeting HMRC rules, so this is an area where assumptions can be risky.
Can workplace nursery support sit alongside other childcare planning?+
Yes. It may sit alongside other childcare planning decisions in a useful way, depending on the employer's arrangements and the household's wider position.
Related guides
- Who is eligible for Tax-Free Childcare, and what does the £100,000 income rule mean?
If you or your partner expect adjusted net income over £100,000, you are not eligible for Tax-Free Childcare. Here is what the rules mean and how to check.
- What is the income rule for 30 hours free childcare, and could it affect your household?
The 30 hours scheme has a hidden income rule. If adjusted net income exceeds £100,000, either parent can make the whole household ineligible.
- Can salary sacrifice reduce your adjusted net income and improve childcare eligibility?
Salary sacrifice may reduce adjusted net income and improve eligibility for Tax-Free Childcare and 30 hours free childcare. Here is what to check.