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HMRC Tax Guidance for Childminders Income and Expenses

November 15, 2018 12:00 am
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5.Working Out How Much Tax is Due

Childminders have to pay tax to HMRC based on their taxable income/earnings using standard income tax rates. Each year you will need to fill out a self assessment tax return.

For the tax year 2018-2019 there is a personal allowance of £11,850 per year, which means you do not pay any income tax on the first £11,850 of earnings.

Income from £11,851 to £46,350 is taxed at a rate of 20%. (If you earn over £46,351 of taxable income there are higher rates of tax, see income thresholds from HMRC for more info).

Taking our example above, taxable earnings were £20,052. £11,850 of this counts as personal allowance and is not subject to income tax, leaving £8,202 to be taxed at 20%.

So of the £20,052 taxable earnings, £1,640.40 is due in tax.

This leaves total earnings for the childminder of £18,411.60 after tax over the course of the year. However, you must also pay National Insurance Contributions (NICs)…

6.National Insurance Contributions (NICs)

Self-employed Childminders must pay two types of National Insurance Contributions (NICs)

Class 2 NICs

For tax year 2018-2019 Class 2 NICs are payable if your profits are £6,205 per year or more, normally worked out on previous earning through self-assessment. If you are unsure about what to pay when starting up you should contact HMRC.

Currently, these are a flat rate of £2.95 per week

Class 4 NICs

In addition, if your earnings (taxable profits) are more than £8,424 in the year, class 4 NICs are also due, at a rate of 9% of the profit/earnings between £8,424 and £46,350 and 2% on profits over £46,350.

For our childminder example above, this means both class 2 and class 4 NICs would be due for the year.

Class 2 NICs would be £153,40 for the year.

Class 4 NICs would be 9% of the difference between £8424 and the total profit/earnings of £20,052… So 9% of £11,628 or £1046.52.

Total National Insurance Contributions would, therefore, be £1,199.92, leaving overall earnings for the childminder in the example of £17,211.68 for the year.

 

If you are still struggling to understand what is required of you in terms of tax and NI from HMRC as a sole trading childminder then HMRC have some useful videos online to help you.

Advice for childminders

 

Other Useful HMRC links on being Self-Employed and Tax for Childminders

Self Employed National Insurance Rates 2018/19

Income Rates and Allowances 2018/19

Simplified Expenses for Working from Home

Simplified Expenses when You Live in your Business Premises

HMRC Business Income Manual

How to Set Up as a Sole Trader

How to Register as a Childminder

HMRC Online Free Course – Advice for Childminders

Support for childminders from HMRC

Legal FAQ’s for new childminders

We are unable to answer questions on HMRC Tax Guidance. Any concerns or queries you may have should be directed to the relevant organisation. You can find some useful HMRC links at the bottom of this article and if you are looking for a resource that will help you manage and track your accounts, please see our Childminding Accounts Record Book

 

 

 

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