The government is set to pledge £750m per year towards childcare for working parents.
Due to start next year, the new scheme will offer 1.9 million families up to £2,000 a year per child towards the costs of care.
David Cameron and Nick Clegg will announce the new scheme today saying that “tax-free childcare will help millions of hard-pressed families”.
Under the scheme, parents paying 80% of childcare costs of up to £10,000 per child to a registered provider will get the remaining 20% tax free.
The scheme will also pledge £50m for helping disadvantaged under-fives and will be open to children up to the age of 12.
“Tax free childcare is an important part of our long-term economic plan. It will help millions of hard-pressed families with their childcare costs and provide financial security for the future,” the Prime Minister will say.
The policy will exclude individuals earning more than £150,000 a year and will apply to families where both parents work.