You can knock £1,000 straight off your childminding income without keeping a single receipt. That's the trading allowance. It sounds like the easy choice, and for some childminders it is. For most, though, it's the wrong one, because childminding has its own generous expenses rules that usually beat £1,000 comfortably.
This guide shows you how to decide. We'll walk through what the trading allowance is, how childminder expenses work (including the bits that are changing under Making Tax Digital), and two illustrative examples so you can see the maths.
It's written for self-employed childminders in England, Wales and Northern Ireland filing a Self Assessment tax return. If you're just starting out, our team at Zmartly helps childminders get this right from year one.
Should a childminder use the trading allowance or claim expenses?
For most working childminders, claiming expenses beats the £1,000 trading allowance, because the HMRC childminder expenses rules (a share of your household costs, a 10% wear-and-tear deduction and the cost of food, toys and outings) usually add up to far more than £1,000. The trading allowance only wins if your real costs are genuinely low, for example if you childmind very part-time.
You cannot do both. For any tax year you either claim the £1,000 allowance or you deduct your actual expenses, whichever leaves you with the lower taxable profit.
What is the £1,000 trading allowance?
The trading allowance lets you earn up to £1,000 of self-employed income tax-free each tax year. It applies to your gross income, which HMRC defines as the total amount you'd put on your tax return before any expenses or allowances are taken off.
There are two ways it can help you.
Full relief. If your gross childminding income for the tax year is £1,000 or less, the income is covered by the allowance. You may not even need to tell HMRC about it, though there are exceptions, so check your position if you're unsure.
Partial relief. If your gross income is more than £1,000, you can deduct the £1,000 allowance from your income instead of deducting your actual expenses. You can deduct up to £1,000, but never more than your income.
The catch is in HMRC's own wording: "You cannot deduct any other expenses or allowances if you claim the allowances." So it's one or the other. Claim the £1,000 and you give up the right to deduct your real running costs, food, wear and tear and everything else.
One important threshold to note: if your gross income for a tax year is more than £1,000, you must register for Self Assessment by 5 October in the following tax year.
What expenses can a childminder claim instead?
This is where childminding is unusual. HMRC has a long-standing agreement (originally with the childminding association now known as PACEY, and set out in HMRC's internal manual at BIM52751) that lets childminders claim a share of home and household costs using simple, hours-based percentages, without itemising every bill.
For the 2025/26 tax year, if you're not yet inside Making Tax Digital, the headline reliefs are:
| What you can claim | How it works |
|---|---|
| Household running costs | A percentage based on hours worked, up to 33% if you childmind 40+ hours a week |
| Household fixed costs | A percentage based on hours worked, up to 10% at 40+ hours a week |
| Wear and tear | 10% of your childminding income, for wear and tear of furniture and household items |
| Food and drink | The estimated cost of food and drink you provide to the children |
| Other business costs | Toys, outings, books, safety equipment, stationery, insurance and similar |
Running costs are things that go up the more you use your home (gas, electricity, water). Fixed costs are things you'd pay anyway (council tax, rent, mortgage interest, home insurance). The percentages are scaled to the hours you work. HMRC's own example: a childminder working 16 hours a week claims roughly 14% of running costs and 4% of fixed costs.
The 10% wear-and-tear deduction covers items like sofas and carpets that aren't used only for childminding. If you claim it, you can't also claim the cost of replacing those same items.
On record-keeping, HMRC's guidance confirms you can claim the estimated cost of food and drink without keeping receipts, and you don't need to keep receipts for individual items that cost less than £10. That keeps the paperwork light.
Add these together and a busy childminder is very often deducting several thousand pounds of legitimate expenses, which is why the £1,000 allowance rarely wins.
A quick note for new childminders: your genuine start-up costs (Ofsted registration, an enhanced DBS check, paediatric first aid training, public liability insurance, toys and equipment) are deductible too. Don't forget mileage at 45p a mile for the first 10,000 business miles in the year, then 25p. If you claim the trading allowance, you lose all of these.
How do I decide which is better for me?
The decision comes down to a single comparison. Work out your total allowable expenses for the year, then compare them with £1,000.
- If your expenses come to more than £1,000, claim expenses. You'll have a lower taxable profit.
- If your expenses come to less than £1,000, claim the trading allowance. You get a bigger deduction for no paperwork.
- If you're bang on £1,000, it makes no difference to your tax, so take the allowance for the simpler record-keeping.
For most working childminders the answer is "claim expenses", and it isn't close. The trading allowance tends to suit people childminding occasionally or for very few hours, where food, a small share of bills and a little wear and tear genuinely come to under £1,000.
One more practical point. You can choose differently from one year to the next. If you have a quiet year with very low income and costs, the allowance might win that year even if expenses win in a normal year.
Worked examples: trading allowance vs expenses
Here are two illustrative examples to show how the comparison plays out. The figures are made up to demonstrate the method, not real client data.
Illustrative example 1: a full-time childminder.
Aisha childminds 40 hours a week and earns £18,000 in 2025/26. She isn't yet in Making Tax Digital, so she uses the childminder percentages.
- Wear and tear: 10% of £18,000 = £1,800
- Share of household running and fixed costs: £1,600 (her own reasonable figure)
- Food, toys, outings, insurance, mileage: £2,400
Her total expenses are £1,800 + £1,600 + £2,400 = £5,800.
Trading allowance would give her only £1,000. Claiming expenses saves her tax on an extra £4,800 of profit, so she claims expenses. Her taxable profit is £18,000 - £5,800 = £12,200.
Illustrative example 2: a part-time childminder.
Beth childminds a few hours a week and earns £900 in the year, with very low costs of about £300.
Her gross income is under £1,000, so full relief applies. The £900 is covered by the trading allowance and she may not need to report it at all. Claiming her £300 of real expenses would actually leave more taxable income, so the allowance is the clear winner.
The pattern is consistent: high hours and real costs point to claiming expenses; very low income and costs point to the allowance.
How does Making Tax Digital change this?
This is the part to watch, because the childminder rules are changing.
Making Tax Digital for Income Tax (MTD for IT) is being phased in based on your qualifying income, which is your total gross self-employment and property income added together. The timetable is:
| Qualifying income | Based on tax year | You must use MTD from |
|---|---|---|
| Over £50,000 | 2024/25 | 6 April 2026 |
| Over £30,000 | 2025/26 | 6 April 2027 |
| Over £20,000 | 2026/27 | 6 April 2028 |
Here's what matters for this decision. On 18 March 2026 HMRC published updated childminder guidance confirming that once you're inside MTD for Income Tax, you can no longer use the bespoke hours-based percentages or the flat 10% wear-and-tear deduction. HMRC's internal manual (BIM52751) now directs childminders within MTD to use the standard approach: a reasonable method of apportioning personal and business costs, and claiming the actual amount you spend on household items rather than a fixed 10%.
The trading allowance itself is unchanged by MTD. It's still £1,000, and you can still choose it instead of expenses.
The practical upshot is twofold. First, if MTD applies to you, you'll need to keep better records of actual costs to claim expenses, because the shortcut percentages are gone. Second, HMRC points out that claiming actual household and replacement costs can sometimes come to more than the old 10% figure, so the new approach won't always leave you worse off. It just needs more careful bookkeeping. Our bookkeeping services can take that off your plate, and the childminder hub walks through the MTD timetable in more detail.
A fair caution: MTD for IT is being introduced in stages and the detail continues to evolve. The dates and thresholds above are the current published rules. We'll keep this guide updated as the position settles.
What about funded hours and Tax-Free Childcare?
Money you receive through a parent's Tax-Free Childcare account, or as payment for government-funded hours, is simply part of your childminding income. It goes into your gross income for the year like any other fee.
That matters for this decision in one way: it counts towards the £1,000 gross income figure and towards your MTD qualifying income. So if funded hours and Tax-Free Childcare payments push your gross income well above £1,000, claiming expenses is almost certainly the better route, and you'll need to register for Self Assessment.
The Tax-Free Childcare top-up (the £2 the government adds for every £8 a parent pays in) isn't a payment to you on top of your fee. It just tops up the parent's account, which they then use to pay you. You record what you actually receive.
Frequently asked questions
Can a childminder claim both the trading allowance and expenses?
No. For any tax year you claim either the £1,000 trading allowance or your actual allowable expenses, not both. HMRC's rule is that you cannot deduct any other expenses or allowances if you claim the trading allowance. Pick whichever gives you the lower taxable profit.
Is the trading allowance ever the right choice for a childminder?
Yes, but mainly for very part-time or occasional childminders whose real costs come to less than £1,000. If your gross income is £1,000 or under, full relief may even mean you don't have to report it. For a full-time childminder, the childminder expenses rules almost always beat £1,000.
Do I still get the 10% wear-and-tear deduction?
For 2025/26, yes, if you're not yet inside Making Tax Digital for Income Tax. You can claim 10% of your childminding income for wear and tear of household items and furniture. Once you're within MTD, HMRC's updated guidance (18 March 2026) says you must instead claim the actual cost of buying, repairing or replacing those items.
When do I have to register for Self Assessment?
If your gross childminding income for a tax year is more than £1,000, you must register for Self Assessment by 5 October in the following tax year. So for income earned in 2025/26, the registration deadline is 5 October 2026.
Does Tax-Free Childcare money count as my income?
Yes. Payments you receive through a parent's Tax-Free Childcare account are part of your gross childminding income, the same as any other fee. They count towards both the £1,000 trading allowance test and your Making Tax Digital qualifying income.
Will Making Tax Digital change which option is better?
It can. MTD removes the bespoke childminder percentages and the flat 10% wear-and-tear deduction, so claiming expenses needs fuller records of actual costs. The £1,000 trading allowance is unaffected. For most childminders, claiming actual expenses will still beat the allowance, but the bookkeeping is more involved.
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Get this decision right with Zmartly
Not sure whether to claim the £1,000 allowance or your real expenses, or how Making Tax Digital affects you? Book a free 20-minute call with a Zmartly accountant who works with childminders, and we'll run the numbers with you. Start at our childminder accounting hub or try the self-employed tax calculator to see your likely bill.
