For the first time in decades, the way childminders claim expenses is being rewritten. Some costs will increase under the new rules. Some will change direction. And the overall impact will be different for every setting.

These figures were created in a completely different economic world — long before the energy crisis, inflation spikes, council tax surges and rising water charges. The old NCMA percentages were designed for a time when household bills were stable, food costs were predictable, and utilities made up a much smaller share of a childminder’s overheads.

The new legislation finally moves away from those frozen percentages and replaces them with something more accurate: actual apportionment — a method that reflects how much of the home is genuinely used for childminding.

This is where some costs go up.

But it’s also where one long‑standing allowance — wear and tear — is being reviewed under the new rules. I’ll cover that separately once the full analysis is complete.

Household costs: the part that goes up

Under the new rules, household costs are based on:

• the number of rooms used
• the hours the home is used for work
• the number of days the home is used for the business
• the number of weeks worked per year

This produces a business‑use percentage that is then applied to the total annual bill.

Because household bills have risen sharply in recent years — and because the new rules finally recognise the full pattern of work in a childminding setting — the actual apportionment method often produces a significantly higher allowable amount than the old NCMA percentages.

Actual apportionment reflects the real number of weeks a childminder works each year. There is no fixed assumption.

Some childminders work around 48–50 weeks, and a smaller number work the full 52 weeks. Term‑time childminders may work 38 weeks or follow another pattern entirely.

The apportionment simply adjusts to reflect your own working year.

In the examples below, I’ve used:

• 48 weeks for a full‑time pattern
• 38 weeks for a term‑time pattern

These are illustrations — your own figures will adjust automatically if you work more or fewer weeks.

Full‑time example (48 weeks)

Old NCMA Method

(Using the real pattern of work under the new rules)

• Old NCMA Total: £1,875
• New Actual Apportionment: £4,947
• Difference: +£3,072

Term‑time example (38 weeks)

Old NCMA Method

(Calculated using the real pattern of term‑time work)

• Old NCMA Total: £1,407
• New Actual Apportionment: £3,929
• Difference: +£2,522

Food and the BIM guidance

HMRC has also updated its guidance on food costs in BIM52751. The manual now states:

“Cost incurred on food and drink for children being cared for is usually a business expense. Reasonable estimates for the costs of food and drink provided for the children being cared for are acceptable and receipts are not required.”

This means:

• Actual food costs (the method we already use) are fully allowable
• Reasonable estimates are allowed only before entering MTD

How this changes once you enter MTD

HMRC then adds:

“Childminders within MTD should follow the digital record keeping requirements of MTD and not use the alternative method set out above.”

So once you enter MTD:

• you must keep digital records of actual food costs
• you can no longer use reasonable estimates
• the old A4 list estimate approach is no longer acceptable

A clean, simple shift:

Before MTD → estimates allowed After MTD → actual costs only

Meal preparation counts as working time

HMRC also confirms that household apportionment is based on hours worked from the home, and that occasional trips out during childminding still count as working hours:

“Occasional visits and trips out when childminding should be included provided care is still fundamentally provided from the childminder’s own home.”

This means:

• Meal preparation done in your home counts as working time
• Trips out during childminding (including buying food with the children) still count
• Weekend grocery shopping does not count — the food is allowable, but the time is not

Fixed‑fee vs variable costs under MTD

As childminders move into MTD, one of the biggest questions is whether receipts are suddenly required for everything. The answer is no — but the rules do change.

Under MTD, costs fall into two simple categories:

1. Fixed‑fee, predictable costs (no receipts needed)

These include:

• toddler groups
• soft play
• music groups
• swimming sessions
• council‑run play sessions
• library rhyme time

These activities usually have:

• a fixed price
• a published fee
• a predictable pattern

For these, the fee itself is the evidence.

2. Variable costs (evidence required)

These include:

• food
• cleaning products
• craft supplies
• toys and resources
• consumables
• fuel (depending on method)

Because these vary, HMRC expects evidence of the actual amount — a receipt or a bank transaction.

A handwritten list or manual entry on its own is not enough for variable costs.

What this means for you

The new legislation finally brings household costs into line with how childminding actually works today. For many childminders, the move to actual apportionment will increase the amount they can claim for core household bills — because the calculation now reflects the full pattern of work in a modern childcare setting.

Wear and Tear is being reviewed separately, and I’ll cover that in its own blog once the full analysis is complete.

HMRC has confirmed that the current 10% Wear & Tear Allowance will not continue once childminders move onto Making Tax Digital (MTD) for Income Tax. The sector is now waiting for the Government to publish the final detail on the replacement rules. This may come before April 2026, and possibly in the March 2026 Budget, but the timing has not yet been confirmed.

Several national childminding organisations and professional bodies are actively lobbying the Government to retain the allowance or introduce a fair transitional arrangement. These discussions are ongoing. While the outcome is uncertain, the sector is united in pushing for a solution that protects childminders’ income.

The direction of travel remains clear: childminders are expected to move to claiming actual costs for household items used in the business. What we don’t yet know is the exact structure, timings, and transitional rules.

If you will be moving onto MTD from April 2026, it may be worth delaying large household purchases until after that date where possible. Items such as furniture, carpets, fridges, sofas and similar domestic goods may be more beneficial under the expected actual‑cost rules if bought once they apply. This is not guaranteed, but delaying purchases could help you benefit if the rules allow full or partial cost claims.

Once the Government confirms the final position, we will publish a full breakdown of the financial impact for different types of childminding settings, including example calculations and planning guidance.

For more guidance on MTD for childminders, see our Making Tax Digital information page.

Coram PACEY are meeting with HMRC during the week ending 16 January 2026 to discuss the proposed withdrawal of the 10% wear‑and‑tear allowance for childminders under Making Tax Digital for Income Tax (MTD for ITSA).

The allowance has been used for many years to cover household wear and tear with a simple 10% deduction. HMRC have said this will not continue under MTD, as the new system requires actual business expenses to be recorded.

This has raised concerns across the sector. Many childminders are unsure how to record household‑related costs in a practical way. Sector organisations want clearer guidance and a fair approach that reflects the realities of home‑based childcare.

Coram PACEY will use this week’s meeting to highlight these issues and ask HMRC how actual‑cost claims will work in practice. They will also raise the administrative impact on small childcare businesses.

At present, HMRC’s position has not changed. The 10% allowance is still expected to end when childminders enter MTD, and no replacement simplified scheme has been offered.

Coram PACEY will share an update after the meeting.

At Accountancy Kids we will continue to monitor developments and provide further information as soon as it becomes available.

See Coram PACEY letter to HMRC

The autumn statement announcements should help small business owners in the shape of a national insurance abolition for class 2 and a reduction for class 4.

The abolition (although not immediate as there still exists voluntary contributions) of class 2 means anyone with profits above £12,570 will no longer be required to pay class 2 national insurance.

Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits including the State Pension through a National Insurance credit without paying any NICs, as they currently do.

Any childminders below £6,725 may still choose to pay voluntary contributions to also ensure contributory benefits. The believe is that the current rate of £3.45 per week will remain in tax year 2024-2025.

Secondly, the class 4 contribution rates payable as a percentage of taxable profits, are reducing from 9% to 8% for self employed with effect from the 6 April 2024. These rates are payable between the thresholds of £12,751 and £50,270.

What’s basis period reform

The rules that sole traders and partnerships use to work out their profits is changing from April 2023. This is called the basis period reform and will affect anyone whose annual accounting period ends on a date other than between 31 March and 5 April.

For 2023/2024 and subsequent years the taxable amount will be calculated by apportioning the business accounts of two years.

Changes on how to report profit

The best way to explain this is through an example:-

If you use the 31 December 2022 as your accounting year end date then you are assessing the twelve months from 1 January 2022 – 31 December 2022. The relevant tax year when your accounting period ends is in tax year 2022 – 2023 and reportable in this tax return.

From 6 April 2023, the new tax year basis applies, this means that you need to report profit up to the tax year end even if your accounting year ends at a different time.

In our example we will need to apportion profits between two accounting periods. The 2023-2024 period is known as the transitional year.

1 January 2023 – 31 December 2023

1 January 2024 – 5 April 2024

• In your self assessment tax return for 2023 – 2024 you will report profits covering more than one year.
• You may need to apportion two set of accounts to calculate your profits for the year.

If you report profits covering more than 12 months the excess is known as transition profit and can be reduced by Overlap Relief.

Spreading Relief

In the transitional year the extra profit can be taxed over five years starting in 2023-2024. This would result in an additional 20% of taxable profit in 2023-24 and for each of the following four years.

It is possible to elect to accelerate when the extra profits are taxed. If you know that a large contract is starting in 2024/25 then you might want to trigger the tax quicker to avoid higher rate tax.

What is overlap relief

In it’s simplest term overlap relief is an allowance to compensate you for profits that are taxed twice. If you didn’t have a 31 March or 5 April starting date when you started your business then the rules for working out your taxable profit would have resulted in your profits being double taxed on these profits.

Under current rules the relief is allowed when your business ceases or you change your accounting basis period.  As the basis period reform is forced on you any overlap relief you’re entitled to must be used for 2023-2024 or earlier.

If your entitled to overlap relief you can use it in any of the 2021/22, 2022/23 and 2023/24 tax years whichever gives the greatest tax saving.

How do I find out my overlap relief

If you are a childminding business who has traded for many years then it’s possible you don’t know your overlap relief figures. You should contact HMRC to obtain the overlap amounts.

HMRC have now developed an online tool to obtain information about overlap relief. This figure is needed to work out your taxable profits for 2023/24.

Please click on the link here to direct you to the HMRC tool: Get your Overlap Relief figure – GOV.UK (www.gov.uk)

You must claim / use your overlap relief in tax year 2023-2024 or earlier.

Apportionment methods and estimates

When you apportion profits the normal method is to look at the number of days however a reasonable alternative is to apportion in months or weeks.

In some circumstances it is likely that you will not know your profit for the whole tax year as your accounts are not finalised for the second part of the tax year.

In this instance you must estimate provisional figures on your tax return and estimate the profit. Once you have prepared the actual figures you must go back and amend the tax return.

What year end should a new business choose in 2023

The simplest thing is to have a short period of account aligning the accounting year end to the tax year end. Any new business should  prepare accounts to the 31 March 2024. This also aligns with Making Tax Digital quarter reporting periods that start in April 2026.

There is no mandatory law that would stop you having a 31 August, 31 December or 31 January accounting year end if your business is cyclical and better suited to these accounting year end dates.

In the main for simplicity it’s best to avoid apportionment of profits and estimating a second set of accounts in your tax return. You would also have to remember to go back and amend the tax return at a future date when actual accounting results are known.

National Minimum Wage

The National Minimum Wage is the minimum pay per hour almost all workers are entitled to by law.

These rates apply from 1 April 2023.

The opportunity to close the gap in any shortfalls in your qualifying years for state pension  has been extended by the government to 31 July 2023. You can check your contribution history via your personal tax account with HMRC.

This could be worth thousands of pounds to some individuals. You can meet the shortfall by making additional voluntary class 3 payments or class 2 payments if your self employed.

The weekly cost of class 3 is currently £15.85 and for class 2 it’s £3.15 per week. One qualifying year can add approximately £275 per annum onto your state pension per annum and this could be worth thousands from retirement if you live a long healthy life.

You can check out your qualifying years by visiting the government state pension forecast calculator Check your State Pension forecast – GOV.UK (www.gov.uk)