MTD for Income Tax – What Childminders Must Do Now

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Making Tax Digital Childminders: When Does It Start?

Making Tax Digital Childminders must prepare for new HMRC rules starting 6 April 2026. From this date, childminders  earning over £50,000 in combined gross income from self-employment and/or property must:

• Keep digital records
• Submit quarterly updates to HMRC
• Complete a End of Period Statement (EOPS)
• Complete a year-end final declaration

The threshold reduces to £30,000 from 6 April 2027 and then £20,000 from 6 April 2028 bringing more childminders into scope. These thresholds are based on turnover, not profit.

 Why Transition Early?

Waiting until the deadline creates risk. Businesses that delay may face:

• Running manual and digital systems in parallel
• Limited time to build confidence before quarterly submissions begin
• Increased likelihood of late penalties
• Difficulty finding qualified support as demand surges

We recommend transitioning to digital records now, so you’re fully prepared and confident before MTD begins.

 What Digital Records Can Do for Childminders

Compared to manual cashbooks and bags of receipts, digital records offer:

• Real-time collaboration with your accountant or bookkeeper
• Instant bank feeds to match invoices and chase late payments
• Mobile access to create invoices and track finances from anywhere
• Receipt capture to avoid lost paperwork or postal delays
• Insightful reports on sales, expenses, profitability, cash flow, and debtors
• Clear tracking of personal drawings and tax set-asides

Incomplete records can lead to last-minute tax stress and the need for HMRC payment arrangements. Digital software ensures your finances are organised, timely, and fully transparent.

Why Cost Shouldn’t Deter Childminders from Going Digital

One of the biggest concerns for childminders is the cost of digital software. But when weighed against the benefits, it’s excellent value.

Based on our childcare sector data, the combined cost of digital software, accountancy services, and tax returns typically averages around 2% of annual sales. That’s a modest outlay for one of the most important parts of running a successful childminding business — giving you real-time financial clarity, professional support, and peace of mind at tax time.

Even if you’re below the MTD thresholds, Making Tax Digital Childminders benefit with digital records to help you:

• Track income and expenses in real time
• Avoid lost receipts and manual errors
• Make confident decisions about fees, cash flow, and profitability
• Set aside money for tax bills and personal drawings
• Work more closely with your accountant — wherever you are

Do I Have to Submit Quarterly Updates to HMRC?

Not unless you exceed the MTD thresholds.

Using digital records does not mean you must submit quarterly updates unless your combined gross income exceeds:

• £50,000 from 6 April 2026
• £30,000 from 6 April 2027
• £20,000 from 6 April 2028

These thresholds are based on turnover, not profit. Even below these levels, digital software helps you make better, faster business decisions — and prepares you for future compliance.

MTD Quarterly Update Deadlines

If you’re required to submit quarterly updates to HMRC under Making Tax Digital, here’s how the reporting periods and deadlines will work:

• Each update must be submitted by the 7th of the month following the quarter end
• Updates are based on your digital records and submitted through approved software like QuickBooks
• You’ll also complete a End of Period Statement (EOPS) and year-end final declaration after Q4 to confirm your full tax position

Electing Financial Quarters for MTD ITSA

Although HMRC’s default quarterly update periods align with the tax year (starting 6 April), businesses with a 1 April to 31 March accounting year may elect to report using financial quarters instead. This election is made within your MTD-compatible software before the first quarterly submission. Once selected, updates will follow standard calendar quarters (e.g. July–September, October–December), avoiding the need to apportion income across mismatched periods. HMRC treats the 1 April year-start as equivalent to 6 April for MTD purposes, allowing full alignment between accounting and reporting quarters

How We Support Making Tax Digital Childminders

We’ve helped many Making Tax Digital Childminders move from manual systems — including cashbooks, childcare platforms, and paper-based receipts — to fully digital records.

If you’re partway through a tax year, we’ll guide you through combining existing records with your new digital setup — but only if you’re onboarded before 30 November 2025.

Since April 2021, all new clients have transitioned to QuickBooks with full support. Here’s how we make it easy:

• Review and complete any outstanding bookkeeping and tax returns
• Set up and manage your digital software
• Offer licences at wholesale prices
• Provide training, guidance documents, and tips via your client portal
• Include a clear responsibility document outlining what you do — and what we do

We never leave clients struggling. If you need extra help, we’re here — whether you’re tech-savvy or starting from scratch.

New Clients and Making Tax Digital Childminders

We’re happy to welcome new clients at any time — but from December 2025 onward, we’ll only support those preparing for the 2026–2027 tax year under Making Tax Digital.

New Clients Accepted:

• Before 30 November 2025: We’ll help you move from paper-based or spreadsheet records into digital software — even if you’re partway through the tax year.
• From December 2025 to March 2026: We’ll register you for MTD and begin working with you immediately — but only to prepare your digital records for quarterly updates to HMRC starting in the 2026–2027 tax year (from April 2026 onward). We will not take on any work relating to any part of the 2025–2026 tax year.
• From April 2026 onward: We’ll provide full MTD support, starting with quarterly updates to HMRC using digital records submitted through QuickBooks. There will be no mixing with older paper receipts or manual records.

We support Making Tax Digital Childminders with tailored onboarding, QuickBooks setup, and full compliance guidance.

Penalties for Late Submission

From April 2026, HMRC will introduce a points-based penalty system for late submissions under Making Tax Digital.

Every time you miss a deadline — whether it’s a quarterly update or your final declaration — you’ll receive one penalty point.

Once you reach four points, HMRC will issue a £200 fine. After that, every additional late submission will trigger another £200 penalty, until you’ve been on time for a full 12 months.

 Example: What Happens If You’re Late

Let’s say you’re a childminder named Bethany. Here’s how the points and penalties build up:

Year 1:

• Quarter 1: Late submission → 1 point (no fine)
• Quarter 2: Late submission → 2 points (no fine)
• Quarter 3: Late submission → 3 points (no fine)
• Quarter 4: Late submission → 4 points → £200 fine

Bethany now sits at the four-point threshold. Because she hasn’t completed a full year of on-time submissions, every future late submission will trigger another £200 penalty.

Year 2:

• Quarter 1: Late submission → 5 points → £200 fine
• Quarter 2: On-time submission → 5 points (no fine)
• EOPS and final declaration 2026-2027 on-time submission → 5 points (no fine)
• Quarter 3: On-time submission → 5 points (no fine)
• Quarter 4: Late submission → 6 points → £200 fine

How to Clear Your Points

To reset your points to zero, you must:

• Submit all quarterly updates and your final declaration on time
• Maintain 12 consecutive months of on-time submissions

If you miss any deadline during that period, the clock resets — and penalties continue.

New Late Payment Penalties (MTD ITSA – from April 2026, per Sch 26, Finance Act 2021)

Day 0–15: Tax paid or TTP agreed – No penalty
Day 16–30: Tax unpaid – 2% of amount unpaid after day 15
Day 30: Still unpaid – Additional 2% of amount unpaid at day 30
Total by Day 30: 4% fixed penalty (2% + 2%)
Day 31+: Still unpaid – Additional penalty begins: 4% per annum daily accrual until paid or TTP agreed

Note: This replaces the old Schedule 56 (FA 2009) regime. Penalties stop once tax is paid or TTP agreed.

What Your Agent Needs to Sign You Up for MTD

From April 2026, some childminders will need to use Making Tax Digital for Income Tax. If you’re working with an accountant or agent, here’s what they need from you:

Your agent must:

Be authorised by HMRC to act for you in Self Assessment

• Have access to an Agent Services Account
• Use compatible software that supports MTD for Income Tax
• Complete a digital handshake — HMRC’s secure process for confirming your permission

Your Permission Is Essential
Even if your agent already submits your annual tax return, they must get your permission before signing you up for MTD. This is because MTD introduces

• quarterly updates and new software requirements
• You’ll be subject to new penalties if deadlines are missed
• You need to understand what MTD means for your business

What You’ll Be Asked For
Your agent may need:

• Your full name, date of birth, and National Insurance number
• Your business name, address, and type of trade
• The start date of your business or property income
• Your accounting method (cash basis or traditional)

HMRC will begin writing to childminders with income over £50,000 from early 2025. Even if you file your tax return as late as 31 January 2026,

you may still receive notification after that — but you’ll still be required to join MTD from 6 April 2026. There’s no fixed deadline for HMRC to notify you, so early preparation is key

If you prefer to manage MTD yourself, you’ll need to sign up using your Government Gateway account, choose compatible software, and submit quarterly updates directly to HMRC — start at gov.uk/guidance/sign-up-for-making-tax-digital-for-income-tax

Frequently Asked Questions

Q: Why should I start MTD now?

A: If your income is estimated to be over £30,000 from April 2027, you must already be using digital records by April 2026.

Waiting until the deadline means you’ll be running two systems in parallel: finalising your 2026–27 accounts under the old rules while trying to learn and operate a new digital process and quarterly reporting system. That overlap creates unnecessary stress and risk.

To avoid this, aim to submit your 2026–27 tax return as early as possible — so you can concentrate fully on your first quarterly update under MTD. Having digital records already in place makes this flow much easier: your figures are organised, accessible, and ready to feed directly into the new system. Starting now gives you time to test your setup, build confidence, and avoid disruption mid financial year — when accounting workloads are already high.

If your income is already over £50,000, you must already be using digital records and submitting quarterly updates from April 2026. If you haven’t started yet, you’re already behind. The deadline is fixed — and fast approaching. You must act now.

Q:What records do I need to keep for MTD?

A: You must keep digital records of income and expenses. The easiest way is create your sales invoices on a laptop and to snap expense receipts from a mobile direct to the digital software. These should be stored in HMRC-compliant software.

Q: What happens if I miss a quarterly update?

A: HMRC may issue penalties or compliance notices. Submitting updates by the 7th of the following month is essential.

*Guidance on MTD is  updated regularly and things might still change* – Any updates will be posted in a blog on our NEWS section or posts in our Facebook page – you must keep checking for updates.

Visit our Facebook page for current news and Making Tax Digital updates.

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