Business expenses are necessary costs that businesses have to pay in order to operate. It sounds straightforward, but there can sometimes be a fine line between what’s counted and what’s not.
Crucially, only costs that are necessary and related to your business qualify. For this reason, personal items like non-uniform clothes or grocery shopping don’t count and must not form part of your business’ accounting. Using this definition, expenses can be categorised three ways:
Fixed expenses: costs that stay the same over time.
Variable expenses: costs that vary, typically based on your usage of certain goods or services.
Periodic expenses: costs that are occasional or sudden, including things like repairs, fines, or annual fees.
If you use your own home for childminding, you can deduct running costs for standard household bills. In this context, HMRC specifies that tax relief on your income is proportional to the hours you work, rather than the number of children you care for during working hours. See the table below for the rates available across different types of costs.
HMRC also provides tax relief for wear and tear or accidental damage within your household, even if it’s to cover things that aren’t used exclusively for childminding. This can be for things like spillages or breakages.
These claims can be up to 10% of your income and recognise your home’s general environment is affected as a childminder, not just the items you buy specifically for childminding. It’s important to note that you can only claim expenses related to cleaning or restoring home items, rather than expensing wholly new purchases outright.
Clothing and laundry
While it’s not part of the PACEY agreement, HMRC allows other businesses to claim on uniforms or protective clothing that are necessary for work.
As a childminder, this might include things like tunics or pinafores specifically meant to protect personal clothing you otherwise wear to be warm and covered. Unfortunately, items you wear as everyday clothing don’t count; this includes high-street clothing, undergarments and jewellery, as they could be worn outside your business. Therefore, when claiming, make sure any clothing expense claims are entirely and exclusively related to your business.
Similarly, of the clothing you do claim for, you can also claim for the money you spend on laundering these items. This might be difficult to calculate to the penny, however, try to do your best in estimating usage of detergents and fabric softeners when calculating your expenses.
Care equipment, materials and food
You can also claim on specific tools and equipment you need for your job. This might include things like sanitising or cleaning products, changing equipment for younger children, toys, stationery and other entertainment materials you have available.
HMRC allows reasonable estimates for food and drink costs. While receipts for this specific expense category aren’t required, it can make your calculations more accurate and help your other expense claims appear more credible.
Travel expenses for regular commuting don’t count. Therefore, if you have a single family household you provide childminding services for, you can’t make any claims on this journey. However, travel between clients or as part of days out while providing childminding services is counted.
You’ll be able to claim on the associated costs of whichever transport method you use, including things like fuel, car mileage and vehicle maintenance, or public transport.
Insurance and legal costs
As a new childminder, you’ll encounter certain legal costs like:
Disclosure checks before working with children
Membership subscriptions to professional organisations and societies
Accounting services (if you hire an accountant to help with your business’ finances)
Because these are all costs related to your business, you can also claim them as expenses on your tax return.
How to claim on expenses to your business
HMRC uses your business’ net profit figure to calculate your income tax and National Insurance contributions. Declare your self-employed income on HMRC’s online Self Assessment portal here and use the records you’ve kept on your business’ finances to evidence income and expenses.
You don’t have to pay income tax on the first £1,000 you’ve made from self-employment. This is called your ‘trading allowance’ and goes on top of your personal allowance, currently calculated at £12,570. Therefore, you’ll only need to pay income tax and National Insurance
if your income is above this figure.
Income tax brackets work slightly differently if you live and earn in Scotland. Therefore, make sure you can pay your income tax bill by planning ahead. HMRC has a useful online tool for self-employed earners to help them plan their tax costs available here. Countingup can also be a big help in this regard.
Make claiming expenses easier with Countingup
Children keep you busy enough, so why add time-consuming and stressful financial admin on top?
The Countingup app makes it simple. It is the business current account with free, built-in accounting software. Countingup automates your bookkeeping, with automatic expense categorisation, expense reminders and a receipt capture tool so you can update and add new expenses quickly and on the go.
The app provides running tax estimates, so you can be confident knowing how much to set aside each month. Find out more here and sign up for your business current account for freetoday.