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HMRC Tax Guidance for Childminders Income and Expenses

November 15, 2018 12:00 am
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3.Useful resources to help you manage your business

To make sure your expenses, tax allowances, fee owed and profit are recorded accurately and to save you a lot of time and stress at the end of a tax year, it’s advisable you use a basic document to record all of your expenses and income.

Our Childminder Accounts Book is a simple but effective resource to help you do this.

4.Working Out Your Taxable Profit

(Note – figures used are an example only and do not give an exhaustive list)

Your taxable profit is the total amount of your income from childminding services you will be required to pay tax on, after you have deducted your costs and expenses. Your taxable profit is essentially your income/earnings as a childminder and is taxed at normal income tax rates. You will need to complete a self-assessment tax return each year find out more here

The basic calculation is:

All Income (including grants) – Costs & Expenses = Taxable Income

To give you a working example we’ll use the scenario of a childminder working from home for 40 hours per week, looking after 6 children – 4 are full time and 2 are part time for 10 hours per week after school (click here for more information on childminding ratios).

Her household includes an older child and her husband. Parents drop their children off and collect them, so there is no need for the use of a car. She has set her fees at £3.50 per hour for those who are with her full-time, and £4 per hour for part-time places.

Income:

Four children are with her for 40 hours per week, each at an hourly rate of £3.50, 2 children are with her for 10 hours per week, each at a rate of £4 per hour.

4 x 40 x £3.50 = £560

2 x 10 x £4.00 = £80

£560 + £80 = £640 per week (or x 52 for £33,280 per year, then divide by 12 for an average per month of £2,773)

Ongoing Costs:

 

  • The rent on her house is £800 per month, council tax is £110 per month, the electricity and gas costs are £100 per month and water is £60 per month. (Remember –  a portion of these expenses can be claimed as costs either using the percentage rates determined by the HMRC childminders agreement, or by the ‘simplified expenses’ method available to those who are self-employed)

 

  • The insurance costs associated with being a childminder are £50 per month
  • Membership of PACEY is £66 per year (or £5.50 per month)
  • Admin materials such as record books, accident book sand  EYFS materials cost £15 per month
  • The proportion of telephone and internet costs attributed to the business cost £7 per month
  • A small advert in the local paper costs £150, which was run for one month during the year
  • Cleaning materials cost £15 per month
  • Toys and craft supplies cost £50 per month
  • Food and drink costs £250 per month

This means that over the course of one year, the costs associated with running a childminding business in this example are:

£130 per month for rent, council tax and utility bills under the childminders agreement with HMRC, or £420 per month/£5,040 per year if using the simplified expenses model (which illustrates why it is important to choose which method you use based on your circumstances). For the purposes of this example we’ll use the ‘simplified expenses method’.

The other costs added together are £392.50 per month (not including the advert), or £4,860 for the year including the advert.

The total costs and expenses for the year are therefore £9,900.

Your taxable income/earnings as a childminder are your total income minus your costs and expenses, so in this example £23,380 – this is your taxable income.

Click next page to view working out how much tax and NI is due … 

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