Accounting for Childminders

Childminding is one of the most common forms of self-employment in the UK, yet many childminders do not fully understand their tax obligations or claim all the expenses they are entitled to. Whether you are just starting out or have been minding for years, getting your accounting right saves you money and keeps you on the right side of HMRC.

As a registered childminder, you are running a business from your home. That status brings specific accounting advantages, particularly around the expenses you can claim.

Setting up as a childminder

Registration requirements

Before you can start childminding, you must register with:

• Ofsted (in England) – or the equivalent body in Scotland (Care Inspectorate), Wales (CIW) or Northern Ireland (local Health and Social Care Trust)
• HMRC – register as self-employed for Self Assessment

Most childminders operate as sole traders. This is the simplest structure and appropriate for the vast majority of childminding businesses.

Key registrations and their costs

Income streams

Childminders typically receive income from several sources. Each needs to be recorded accurately.

Tax-Free Childcare

Under the Tax-Free Childcare scheme, parents open an online account and pay in money. The government adds 20p for every 80p the parent contributes, up to a maximum of £2,000 per child per year (£4,000 for disabled children).

You receive the full amount (parent contribution plus government top-up) from the parent’s TFC account. All of it is your taxable income – there is no distinction between the parent’s money and the government top-up for your accounting purposes.

Funded hours

If you deliver funded early education hours (15 or 30 hours for eligible children), the local authority pays you directly. The hourly rate varies by area but is typically £5-£8 per hour. This is taxable income.

You can charge parents separately for:

• Hours beyond the funded entitlement
• Meals and snacks
• Consumables (nappies, wipes)

Keep funded hours income and additional charges clearly separated in your records.

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Allowable expenses

This is where childminder accounting gets interesting. Because you work from home and use your home as a place of business, you can claim a proportion of your household costs.

Home costs

HMRC accepts two methods:

Method 1: Simplified flat rate

Most childminders work well over 101 hours per month, so the maximum deduction is £26/month (£312/year). This is rarely the best option.

Method 2: Actual costs (proportional)

Calculate the proportion of your home used for childminding and the proportion of time it is used. Then claim that percentage of:

• Mortgage interest or rent
• Council tax
• Electricity and gas (childminding uses significant heating and lighting)
• Water rates (particularly relevant given increased usage)
• Home insurance (the additional cost of business use)
• Repairs and maintenance to areas used for childminding

How to calculate the proportion

A common approach is:

1. Count the rooms used for childminding (including kitchen, bathroom, hallways)
2. Divide by total rooms in the house
3. Multiply by the proportion of time used for childminding (e.g., 10 hours per day out of 24 = 42%)

Example: You use 4 out of 7 rooms (57%) for childminding, 10 hours per day, 5 days per week, 48 weeks per year.

Proportion = 57% x (10/24) x (5/7) = 17% of annual household costs.

On a house with annual running costs of £12,000, that gives a deduction of £2,040 – significantly more than the flat rate of £312.

Food and consumables

For food, you can either track actual costs for each child or use a reasonable flat rate per child per day. HMRC does not prescribe a specific amount, but £2-£3 per child per day for snacks and a meal is generally accepted.

Travel expenses

• Trips to playgroups, parks, soft play – claim mileage at 55p per mile (first 10,000 miles)
• School runs for minded children
• Training courses and conferences
• Trips to buy supplies

Keep a mileage log recording the date, destination, purpose and miles for each journey.

Professional costs

• Ofsted registration and inspection fees
• DBS checks
• First aid training
• Childminding courses and CPD
• PACEY (Professional Association for Childcare and Early Years) membership (~£79/year)
• Public liability insurance
• Accountancy fees

Equipment and capital items

• Car seats for transporting children
• Pushchairs and buggies
• High chairs and cots
• Safety equipment (stair gates, socket covers, fireguards)

Items used exclusively for the childminding business can be claimed in full. Items with mixed personal and business use should be apportioned.

Record-keeping

HMRC requires you to keep records for at least 5 years after the filing deadline. For childminders, this means tracking:

• Income received from each parent/source, with dates and amounts
• Attendance registers showing which children attended on which days
• Expense receipts for all business purchases
• Mileage log for business journeys
• Bank statements (use a separate bank account if possible)

Attendance registers are essential

Your attendance register is your primary evidence of the income you earned. Record:

• Child’s name
• Date and times of attendance
• Rate charged
• Amount paid and payment method
• Whether funded hours were used

This register also helps you monitor your Ofsted ratios (typically a maximum of 6 children under 8, of which no more than 3 are under 5).

Filing your Self Assessment

Key dates

What to report

On your Self Assessment return, you report:

• Total income from childminding (all sources combined)
• Allowable expenses (broken down by category)
• Net profit (income minus expenses)

You pay Income Tax on your net profit above the personal allowance and Class 4 NIC on profits above the lower profits limit.

Tax and NIC rates

The allowance, band limits and NIC thresholds are set at the Budget. HMRC publishes the current rates, limits and thresholds on GOV.UK.

Setting money aside

A common rule of thumb is to set aside 25-30% of your net profit for tax. Put this into a separate savings account each month so you are not caught short when the bill arrives.

VAT for childminders

Childcare provided by a registered childminder is exempt from VAT (Group 9, Schedule 9, VAT Act 1994). This means:

• You do not charge VAT on your childminding fees
• You cannot recover input VAT on your business purchases
• Your childminding income does not count towards the VAT registration threshold

This is almost always beneficial, as it keeps your fees lower for parents without requiring you to deal with VAT administration.

Working Tax Credits and Universal Credit

If your childminding income is low, you may be entitled to Universal Credit (which has replaced Working Tax Credits for new claimants). Your self-employment income is assessed under the Minimum Income Floor rules after a 12-month start-up period, which assumes you earn at least the National Minimum Wage for the hours you are expected to work.

Common accounting mistakes childminders make

• Using the flat rate for home expenses when the actual cost method would give a much larger deduction
• Not keeping an attendance register – without this, you cannot substantiate your income figures
• Forgetting to claim food costs – if you provide meals and snacks, this is a genuine business expense
• Not tracking mileage – school runs, playgroup trips and supply shopping all qualify
• Missing professional fee deductions – Ofsted fees, DBS checks, insurance, training and PACEY membership are all allowable
• Not separating personal and business finances – a dedicated bank account makes record-keeping far simpler

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