HMRC Tax Guidance for Childminders Income and Expenses

November 15, 2018 12:00 am
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Running your own business as a childminder

Being a childminder usually means you’re self-employed (a sole trader). As a sole trader you are the sole owner and operator of your business and this means only you are responsible for paying any tax owed.

Some childminding businesses, particularly those who are registered as childcare on domestic premises, can be set up as a partnership or a limited company. If you set up your childminder business as a limited company, your liability is limited to what you (and possibly others such an assistant/director) have invested.

If you set up a limited company, there is the benefit of having a protected company name from Companies House. Also, if you plan to retire in the future and hand your childminding business over, it’s much easier and more professional to do this if you are a limited company rather than a sole trader.

Running your own business as a sole trader means your income is from the ‘sales’ of the business, and not a wage or salary in the way it is when you work for someone else. For this reason, you need to know how to work out what tax is due to HMRC (Her Majesty’s Revenue & Customs) when you’re a childminder, and how to work out your expenses and profit so you can pay the right tax and National Insurance to HMRC.

There’s a £100 penalty if you don’t submit your tax return on time, with further penalties if your tax return is submitted more than three months late.

Although this sounds scary and can sometimes seem a little challenging, we’ve laid out some straightforward explanations to help you make sense of your tax situation as a childminder…

To make this a little easier we’ve split this article into six useful sections:

  1. Childminder accounting and tax overview
  2. Childminding costs and allowable expenses
  3. Useful resources to help you manage your business
  4. Working out your taxable profit
  5. Working out how much tax is due
  6. National Insurance Contributions (NIC’s)
  7. Useful links to HMRC information on childminders and tax

Remember, to run a childminding business you must Register with HMRC as a sole trader.

Our popular printed government resource Childminder Agencies A Step-byStep Guide is a simple but very informative guide for organisations or individuals looking to set up a childminding business.

This guide contains everything you need to know, from how your business might be funded, to the registration and the application process. It is advised that this guide is kept to hand as it can also be referred to for practice support on continuous professional development and keeping children safe from harm.

1.Childminder Accounting & Tax Overview


When you are a childminder your income is derived from the sales of your business. This is the total amount of money earned and normally includes payments from parents and any funding or grants you might receive for the provision of childcare. It is important to note that for accounting and tax purposes, income due to you on a certain date counts for that period – even if it has not yet been paid. The income from these sources added together make up your turnover.

Our Childminding Contracts allow you to record the contracted hours for a child, payment rates and to note when payments are due. Making sure this document is accurate and updating it when necessary will help you when cross referencing and filling out your childminding contract book. See below.

(Note – Childminding is exempt from VAT, so we do not include or refer to it further in this article)

Click next page to view Childminding costs and allowable expenses … 

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