Making Tax Digital · Sole traders
Childminders: PACEY expense arrangements, food, and household costs under MTD
ONLY£15A MONTHUnderstand the April 2026 change to childminder expense concessions, household costs, food records and parental payments under Making Tax Digital.
If you have used familiar childminder percentages for years, being told to keep digital records can sound like an administrative change. For childminders entering Making Tax Digital, there is a more substantial point: HMRC has changed which expense arrangements they can use.
You can still claim legitimate childcare business costs. The important step is to move to the correct method, keeping enough evidence to support food, equipment and household deductions without trying to make a family home look like a separate commercial building.
What changed in April 2026?
HMRC’s childminder expenses manual, updated for MTD, says its alternative childminder arrangements no longer apply to childminders within MTD from April 2026. These childminders must use normal business expense and record-keeping rules.
| Older alternative arrangement | Position for a childminder within MTD |
|---|---|
| Fixed 10% household wear-and-tear deduction | Use normal rules for actual eligible costs |
| Household percentages based on caring hours | Use a reasonable business and private apportionment |
| Estimated children’s food costs without receipts | Follow normal digital record-keeping requirements |
| Receipt concession for individual purchases below £10 | Follow normal record requirements |
Childminders outside MTD may still use the alternative arrangements where applicable. Even there, the full-time household figures distinguish 33% of running costs from 10% of fixed costs. They are not a blanket 33% of every bill. The food arrangement is not a statutory fixed meal rate per child.
When Making Tax Digital applies
Making Tax Digital for Income Tax changes how qualifying sole traders and landlords keep records and report income. Under HMRC’s timetable, the starting points are:
- From 6 April 2026, if qualifying income exceeded £50,000 in 2024–25.
- From 6 April 2027, if qualifying income exceeded £30,000 in 2025–26.
- From 6 April 2028, if qualifying income exceeded £20,000 in 2026–27.
Qualifying income generally means gross self-employment and property income combined, before expenses. Salary, pension income and dividends do not count towards this particular test. Check HMRC’s qualifying income guidance, including the treatment of VAT and shorter accounting periods where relevant.
The test uses the relevant earlier tax year; passing a figure during a busy month does not mean you join that day. Exemptions can apply. These rules concern your individual business and property income, rather than a limited company’s Corporation Tax reporting.
How to work out household costs now
Start with actual bills and identify a reasonable business share. HMRC’s self-employed premises guidance allows appropriate business costs where you work from home. The method should reflect the rooms or space used, the nature of each cost and the time spent using the home for work.
For example, additional heating for occupied childcare rooms might need a different calculation from a fixed household charge. An equal-room calculation is not automatically suitable where the rooms vary greatly in size or use. Write down your assumptions and revisit them when your hours or premises change.
Mortgage capital repayments are not an expense. Do not turn the whole mortgage payment into “rent”. Also distinguish repairs from improvements, particularly where building work creates or substantially changes a dedicated childcare area.
The normal simplified homeworking expenses are another option where their conditions are met. Their monthly rates are £10 for 25–50 hours, £18 for 51–100 hours and £26 for 101 hours or more. These are general business rules, not the old childminder household percentages. Do not claim overlapping costs twice.
Food records can be practical
A separate food shop is helpful but not essential. If the family and childcare food are on one receipt, identify the business ingredients and keep a reasonable allocation for shared items. A menu and attendance record can explain why quantities were bought, but should accompany purchase evidence rather than become an invented per-child allowance.
Keep the calculation proportionate. Recording that two of six identical yoghurt packs were bought for minded children is easier to support than applying an unexplained percentage to every supermarket transaction, including household toiletries.
Worked example: a week’s childcare purchases
Amira is within MTD, uses the cash basis and is not VAT registered. She makes the following purchases wholly for her existing childminding business.
| Purchase | Total paid | Allowable amount in this example |
|---|---|---|
| Food shop, with childcare items identified | £92 | £36 |
| Craft materials for minded children | £24 | £24 |
| Replacement safety gate used only for childcare | £65 | £65 |
| Family supermarket items within the food shop | Included above | £0 |
| Total business deduction | £125 |
Her £125 deduction follows identified costs. It does not depend on creating a standard meal price or adding a percentage wear-and-tear claim. If the safety gate also serves a private purpose, she needs to reconsider the business allocation.
Toys, safety equipment and professional costs
Books, fire blankets, suitable car seats, outdoor play equipment and insurance can all deserve a place in your records. They still need a business purpose. Under section 34 of the Income Tax (Trading and Other Income) Act 2005, private spending is not deductible merely because a business operates at home. See HMRC’s business purpose guidance.
Under the cash basis, most eligible equipment is deducted when paid for. Traditional accounting can instead require capital allowances. Keep evidence of ownership, purchase and any private use, rather than assuming every replacement household item qualifies in full.
Parental fees, advance payments and funding
Record parental fees and local authority payments for funded childcare as business income. Under the cash basis, ordinary fees paid in advance are generally recorded when received, even if the childcare takes place later. A genuinely refundable security deposit needs separate consideration of its terms and purpose.
Reconcile council remittance statements to the bank, including adjustments or recoveries. Maintain a simple reference for each payment so you can resolve a shortfall without putting unnecessary information about children into bookkeeping descriptions.
A manageable quarterly routine
For a business using standard tax-year periods, the 2026–27 quarterly update deadlines are 7 August 2026, 7 November 2026, 7 February 2027 and 7 May 2027. Updates are cumulative: each covers the tax year so far. Calendar update periods are also available, with the same deadlines.
Keep digital income and expense records, reconcile them regularly and send the required totals through compatible software. The Income Tax (Digital Obligations) Regulations 2026 underpin the requirements; HMRC’s digital record-keeping notice explains the applicable directions. A bank feed needs supporting detail wherever a payment conceals fees, private purchases or several transactions.
Normally, record the transaction date, amount and relevant category, retaining supporting invoices or receipts. HMRC’s digital records guidance explains permitted simplifications and digital links where more than one software product is used.
Quarterly updates do not replace the annual tax return. The 2026–27 return is due by 31 January 2028, and normal tax payment dates continue. HMRC is not applying late quarterly update penalties for 2026–27, but digital records and updates are still required. That first-year approach does not waive other filing or payment obligations.
Make the change with support that suits you
The transition starts with clear receipts, sensible household calculations and accurate fee records. Avona.app costs £15/month for self-service use, with Avona AI supporting categorisation. If you would value help moving from older childminder arrangements, Avona Concierge is managed by chartered accountants and starts from £60/month.