Childminder Making Tax Digital: The Exemption Trap

April 2026 is closer than your next Ofsted inspection, and if you are a registered childminder earning above £50,000, HMRC already expects you to be preparing for Making Tax Digital for Income Tax. If you are earning above £30,000, your deadline is April 2027. Yet across childminder Facebook groups and PACEY forums, the same dangerous assumption keeps surfacing: "I thought we were exempt."

You are not. And the confusion is costing childminders real money.

Where the Exemption Myth Comes From

The confusion has a traceable origin. HMRC does offer registered childminders a simplified expenses arrangement: rather than receipting every pack of wet wipes and every portion of food you serve, you can claim a flat rate based on the number of children you care for. For 2024/25, that is £10 per week for one child, £15 for two, and £20 for three or more, covering food, activities, and consumables.

This simplification is genuinely useful. But it applies to expenses, not to whether you need to file tax returns or, from April 2026, submit quarterly MTD updates. The flat-rate scheme has never meant you fall outside Self Assessment. It means your expense calculation is easier once you are inside it.

Somewhere along the line, "simplified taxes" became "no digital tax requirements" in the collective understanding of many childminders. HMRC has not done much to correct that impression publicly, which is a recurring theme in how this department communicates with small, informal sole traders.

What MTD Actually Requires From a Childminder

Let us be specific, because generalities are what created this mess in the first place.

Under MTD for ITSA, you will need to:

1. Keep digital records of every payment you receive from parents (or their employers, if they pay via childcare vouchers or Tax-Free Childcare).
2. Submit a quarterly update to HMRC covering your income and expenses for each three-month period.
3. Submit an End of Period Statement (EOPS) once a year, confirming your figures are correct.
4. File a Final Declaration (formerly your Self Assessment return) to settle any additional income, such as interest or rental income.

The four quarterly submission deadlines fall on 7 August, 7 November, 7 February, and 7 May. Miss one, and under HMRC's new points-based penalty system, you accumulate a penalty point. Reach four points, and you face a £200 fine, with further £200 charges for every subsequent missed submission. That is not a hypothetical: it is the published penalty structure under the Finance Act 2021.

The Tax-Free Childcare Complication

Here is a wrinkle that almost nobody talks about. Many childminders receive payments through the government's Tax-Free Childcare scheme, where parents top up a government-funded account and payments are made to you via the National Savings and Investments (NS&I) portal.

For MTD purposes, the gross amount you receive from that account counts as trading income, regardless of how it was funded. The 20% government top-up is not your money to keep if a parent withdraws, but the total payment arriving in your bank account is what HMRC expects you to record. If you are used to just noting "£800 from the Smith family this month" without thinking about whether that included a £160 government contribution, you need to reconsider your bookkeeping.

The practical implication: your MTD-compatible software needs to record the full payment amount as income in the period it is received. You cannot defer it, net it off, or average it across terms.

This is not dissimilar to the problem Making Tax Digital for Actors: The Income Problem explores with irregular income, except childminders have the added layer of a government payment scheme that sits between them and the parent.

Using the Flat-Rate Scheme Under MTD: Does It Still Work?

Yes, and this is genuinely good news. The childminder flat-rate expense scheme is not being abolished by MTD. You can still claim those simplified expense amounts rather than itemising every receipt.

The catch is that MTD software must allow you to enter those flat-rate figures as an expense category rather than forcing you to upload individual receipts. Most major MTD software does support this, but it is worth confirming before you commit to a subscription. Some platforms built primarily for retail or construction businesses assume you will be logging receipts for everything; their expense categorisation may not map cleanly onto HMRC's childminder-specific guidance.

What you do still need to record digitally, with no simplification available:

• Every payment from every family, by date and amount
• Any other income, including HMRC funding for free entitlement hours (more on this below)
• Any expenses you claim outside the flat rate, such as a dedicated childminding vehicle or home office costs

Free Entitlement Funding: Income or Not?

This is where things get genuinely complicated, and where HMRC's published guidance is, to put it diplomatically, not as clear as it could be.

If you are registered with your local authority to offer 15 or 30 funded hours for eligible children, you receive payments directly from the local authority for those sessions. These payments are trading income. They are not a grant, not a benefit, and not exempt from tax. They go on your tax return, and under MTD, they go into your quarterly digital records as income in the period received.

The reason this trips people up is that the funding rates are set by local authorities and vary significantly by region. Some childminders receive a higher rate per funded hour than they charge privately; others receive less. Either way, the gross amount received from the local authority is what HMRC expects to see recorded.

If your combined private fee income and local authority funding takes you above the MTD threshold, you are in scope. There is no carve-out for state-funded childcare provision.

This is a pattern you see across service businesses: income that arrives through government or institutional channels still counts. MTD for Life Coaches UK: What HMRC Wants From You touches on similar issues with publicly funded therapy referrals.

The Home-as-Workplace Expense Problem

Most childminders work from home. That creates a legitimate and often under-claimed expense: use of home as a workplace.

Under HMRC's simplified expenses rules, you can claim a flat rate based on the number of hours per month you work from home. At 25 to 50 hours per month, that is £10. At 51 to 100 hours, £18. Above 101 hours, £26. For a full-time childminder working 40 hours per week, that is easily the highest band every month, or £312 per year.

Alternatively, you can calculate the actual proportion of your home used for childminding, multiplied by your total household running costs (mortgage interest or rent, council tax, utilities), and claim that proportion. For a childminder who uses three rooms during childminding hours, the actual cost method can yield significantly more than the flat rate.

Neither method is difficult, but both require you to have the underlying figures recorded somewhere. Under MTD, that somewhere needs to be a compliant digital system. A notebook on the kitchen counter is no longer sufficient.

For mileage, the picture is similar. If you drive children to activities, collect them from school, or travel to childminding training, those miles are claimable at 45p per mile for the first 10,000 and 25p thereafter. The Mileage Claim Calculator: Stop Leaving Cash on the Road post explains this in detail, and the same logic applies under MTD: the records must be digital and contemporaneous.

People also ask

Do childminders have to register for Making Tax Digital?

Does the childminder flat-rate expense scheme still apply under MTD?

Does local authority funding for free childcare hours count as taxable income?

What software do childminders need for Making Tax Digital?

What Happens If You Are Just Under the Threshold?

If your gross childminding income is below £30,000, you are not currently in scope for MTD. But "currently" is doing a lot of work in that sentence.

HMRC's published roadmap extends MTD to all self-employed individuals eventually, with no lower threshold specified beyond the initial rollout phases. The £30,000 floor for April 2027 is not a permanent exemption; it is a phased implementation. HMRC has already moved the goalposts on MTD deadlines three times since the programme was first announced in 2015, so scepticism about future thresholds is reasonable. What is not reasonable is assuming that because you are currently below the threshold, you never need to prepare.

If your income is close to the boundary, it is also worth understanding that your gross income is what counts, not your profit. A childminder earning £28,000 in fees but spending £8,000 on legitimate business costs has a £20,000 profit but a £28,000 gross income. If fees increase modestly over the next year, you could cross the threshold mid-year without realising it until you do your Self Assessment.

For a detailed look at threshold mechanics, MTD Under the Threshold: Are You Actually Safe? is worth reading.

Choosing the Right Software Without Overpaying

The MTD software market has a well-documented tendency to price for small businesses rather than sole traders. Packages designed for companies with employees, VAT returns, and multiple income streams cost between £20 and £40 per month. For a childminder whose bookkeeping needs are genuinely simple, that is £240 to £480 per year for functionality you will never use.

The Making Tax Digital Accountant Software: Who Is It Really For? post covers this market distortion in detail. The short version: most MTD software was built for accountants managing multiple clients, not for individual sole traders doing their own books.

What a childminder actually needs from MTD software:

• Simple income logging by date and payer
• Expense categories that include flat-rate options
• Automatic quarterly submission to HMRC
• A clear view of estimated tax liability so there are no surprises in January

TapTax was built specifically for this use case. You log your income as you receive it, apply your expenses (flat rate or itemised, your choice), and the app handles the quarterly submission to HMRC directly. There is no accountancy jargon to decode, no modules for payroll or VAT, and no per-client pricing designed for firms rather than individuals.

The Registration Question Nobody Asks

One final point that catches childminders out: you cannot simply start using MTD software and begin submitting. You need to sign up for MTD for ITSA with HMRC separately from your existing Self Assessment registration. The two systems do not automatically connect.

HMRC opened the MTD for ITSA voluntary sign-up in 2024. Mandatory sign-up for those above £50,000 is required before your first MTD period begins in April 2026. If you leave registration until March 2026, you risk a chaotic onboarding process at precisely the time HMRC's systems will be handling a large volume of new registrations.

The registration process requires your National Insurance number, your Unique Taxpayer Reference (UTR), and the start date of your accounting period. If you are already registered for Self Assessment, you have all of these.

Start Before You Have To

The exemption trap for childminder making tax digital HMRC compliance is not a technical one. It is a perception one. The belief that simplified expenses means simplified obligations has left thousands of childminders unprepared for a mandatory digital reporting regime that is, regardless of how many times HMRC has delayed it, now genuinely arriving.

If you earn above £50,000 from childminding, you have until April 2026. Above £30,000, April 2027. Below that, you have time, but not unlimited time.

The practical next step is straightforward: check your last Self Assessment return, confirm your gross income figure, and if you are within striking distance of either threshold, sign up for a free trial of TapTax today. Log one week of income. See how the quarterly submission process actually works before it is mandatory. That single hour now is worth considerably more than a £200 penalty point in February 2027.

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