Childminders and Making Tax Digital (MTD). What Changed in 2026 and What It Means in Practice

From 2026, childminders in the UK face a clear shift in how they must calculate expenses and keep records once they fall within Making Tax Digital (MTD) for income tax. While childminders have historically benefited from flexible, simplified methods agreed decades ago, HMRC has now tightened the rules. The message is straightforward: once you are within MTD, you must follow the standard tax rules—no shortcuts.

Traditionally, childminders operated under a unique arrangement dating back to 1986, when what was then the Inland Revenue agreed with the National Childminding Association (now the Professional Association for Childcare and Early Years) to allow alternative methods for calculating certain expenses. These simplified methods were designed to reduce administrative burden, especially given that childminding often takes place within the home, making it difficult to separate business and personal costs precisely.

However, on 18 March 2026, HMRC updated its guidance (BIM52751) and made an important clarification. From the moment a childminder comes within MTD for income tax, they are required to use the standard approach when calculating taxable profits. This is not optional. The alternative simplified methods still exist, but their use is now more restricted and cannot replace the standard rules under MTD.

One of the key areas affected is household expenditure. Under the standard approach, a childminder can either claim a flat-rate deduction based on the total hours worked or calculate a proportion of actual household costs using a reasonable method of apportionment. This typically involves splitting costs such as utilities, rent, or mortgage interest between business and personal use. While this approach is more accurate, it also requires more detailed record-keeping.

Under the older alternative approach, childminders could simply apply a fixed percentage to their household running costs based on hours worked, without needing to calculate exact proportions. While this method still exists, HMRC has clarified that it now applies only to the portion of activity carried out from the home. This distinction has become important following a 2024 change by the Department for Education, which introduced a new category of childminders operating from non-domestic premises. In such cases, the simplified household-based percentages are no longer fully applicable.

Another area impacted is the treatment of furniture and household items. Under the standard approach, costs for purchasing or replacing furniture may be claimed either as allowable expenses under the cash basis or through capital allowances under the accruals basis. In both cases, adjustments must be made if items are used partly for personal purposes. This requires more precise tracking and justification.

Previously, the alternative method allowed childminders to simply deduct 10% of their total income to cover wear and tear of furniture and household items. While still permitted in certain contexts, this method is now limited and cannot override the requirement to follow standard tax rules within MTD.

Record-keeping requirements have also become stricter. Under the standard approach, childminders must comply with statutory record-keeping rules and, once within MTD, maintain digital records and submit updates using compatible software. This represents a significant change for those who previously relied on simpler, paper-based systems.

Under the alternative approach, HMRC had allowed more relaxed practices, such as accepting reasonable estimates for food and drink costs and not requiring receipts for items under £10. While some of this flexibility may still apply in limited situations, it does not remove the obligation to meet MTD’s digital record-keeping standards.

In practical terms, this means that childminders need to prepare for a more structured and disciplined approach to their finances. The days of relying heavily on simplified percentages and minimal paperwork are effectively over once MTD applies. Instead, accurate tracking of income and expenses, proper categorisation, and digital compliance are now essential.

The key takeaway is simple but important: MTD is not just a reporting change—it fundamentally changes how profits must be calculated. For childminders, this means moving away from informal or simplified methods and adopting a more formal accounting approach. Those who fail to adapt risk errors, penalties, or rejected submissions.

For many, this change will require new habits, possibly new software, and a better understanding of allowable expenses. But done correctly, it also provides clearer financial visibility and reduces the risk of disputes with HMRC.