Employees who receive help with childcare costs from their employers are to receive a tax break.
British parents face the highest childcare costs in Europe
Workers will be able to receive up to £50 per week in subsidised childcare services, childcare allowances or vouchers tax-free.
Previously parents had only received tax free help if their employer managed the childcare facility.
The news came as the chancellor announced his twice yearly pre-Budget report.
According to a recent survey, parents in the UK pay on average £6,650 a year for each child.
Tax relief on £50 a week childcare spending could benefit millions of employees using registered childcare.
However, tax exemptions will only apply to spending on registered childcare.
Many workers who rely on friends and relatives to look after their children while they are at work will not benefit.
About one in ten employers provide some kind of childcare help to employees.
It is hoped that the tax break will encourage more firms to help out their workers and as a result has received a warm welcome from childcare charities.
Stephen Burke, director of the Daycare Trust, said: "Paying for childcare is the number one issue for parents calling our helpline. The cost is simply beyond the reach of many families."
"The measures announced today will help more working parents pay for childcare. The Chancellor is living up to his reputation as the childcare champion," Mr Burke added.
However, other people are more sceptical about its merits.
They believe it will add to the costs and complexities for employers, as well as raising national insurance costs for many employees who already benefit from NI free childcare and their employers.
Work-based nurseries are expected to retain their current tax and NI free status.
However, other forms of existing employer-provided childcare will be affected by the cap.