Managing your Accounts

As a self-employed childminder, you are responsible for your own Income Tax and National Insurance contributions. You must register as self-employed with HMRC and keep records of your income and expenditure so as you can complete your annual self-assessment tax return.

We understand that working out income, expenses and completing your self-assessment can all seem a bit daunting, especially if you are new to running your own business. Keeping on top of your accounts can be a challenge when you are already rushed off your feet doing everything else than comes with running a busy childcare service.

Take the stress away by following our helpful tips…

1. Don’t panic!

Have a read through HMRC’s Tax Advice for Childminders online which will help you to understand what needs to be done, when and why.

Remember that you need to notify HMRC as soon as you start your self-employment. You can do this here.

2. Find an organised method to record your income and expenditure.

HMRC will need to know the total income you receive each tax year (6th April to 5th April the following year) and what you have spent (total expenses) as a result of running your business.

Refer to our Accounts Pack for all the logsheets you will require to keep accurate records of your business finances. These can be completed and saved digitally or printed out and filled in by hand.

Whatever methods you use to record income and expenditure, remember that your income is the amount that you actually receive. Do not include any outstanding fees until they are actually paid.  If you are unsure about what you can include as allowable expenses, refer to the HMRC guide.

3. Remember to keep receipts and write EVERYTHING down!

Whilst HMRC ask only for receipts for items costing £10 or more, keeping all receipts which include even small items or taking notes in a notebook or on your phone will help you to ensure that you don’t forget anything when calculating your business expenses. Small everyday costs such as playgroup fees, purchasing ice lollies at the park or picking up some wipes at the shops can really add up over the year so don’t forget these small outlays as they could add up to make a BIG difference to your tax bill at the end of the year.

As soon as you receive a payment, you should take a note of the date and amount and, if possible, issue parents with a receipt or ask them to sign a payment record form. This will allow you to keep an accurate record of what has actually been paid and also help to avoid any disputes.

4. Ensure your fees and payment policies are clear.

To avoid disputes with parents and ensure that you are paid in full and on time, make sure that you are clear about the fees that you charge, when payments are due and the methods in which payments can be made at the very beginning of any childcare arrangement. Having a Fees Policy and a Late Payment of Fees Policy in place will allow you to explain everything parents need to know about paying for your service and what charges are made for holidays, illness, additional hours, etc.

Refer to our Policies & Procedures Pack for templates.

Issuing invoices to parents will remind them that it is time to make payment and also set out clearly any reductions or additional charges. Refer to our Invoice & Receipt templates.

If you are unfortunate enough to have late or non-paying parents make sure that you follow your late payment procedures and take note of each time you request or remind parents and also whether any payment plans are agreed.

This step is more to do with your own business management than what is required by HMRC but it is important. If a parent is continually late with payments, this could risk putting you, your business and your own family into financial difficulty.

5. Keep on top of your records

You may be brilliant at recording when fees are paid and keeping receipts but unless you set aside time on a regular basis to update your financial records then you risk spending hours calculating everything in one go in order to submit your HMRC self-assessment on time.

If possible, try to set aside half an hour each week or an hour or so each month to update your income and expenditure records. You may find it useful to do this at the same time as when you are calculating invoices for parents or when you receive your monthly bank statement so that you can see clearly your income and outgoings. If you stay on track then you will only need to add together your monthly totals at the end of the financial year rather than spending hours with your calculator!

6. Set aside money each month or make regular tax payments

Remember that when you are self-employed any tax that you are due is not automatically deducted from your income. You will need to set aside money or set up regular payments in order to cover your tax bill…unless you expect that your annual income will fall below the tax-free personal allowance (currently £11,850). You may find that this is the case in your first year as a childminder or if you have several vacancies, or if some of your spaces are being filled by your own children. Remember that despite your income falling below the threshold, you are still required to complete a self-assessment and may also need to maintain your National Insurance contributions in order to be entitled to certain benefits.

A good guide is to put aside 20% of your income each month, if you can afford this.

7. Complete your return and pay your tax bill on time!

If you have registered with HMRC online services then you can complete and submit your self-assessment online. If you have not already registered, do not leave it until the last minute as you will require an Activation Code in order to log in which can take up to 7 days to arrive.

You do not have to complete the form all at once, you can save and return to it and if you get stuck, you can find further guidance on the HMRC website here.

Remember to submit your return on time (by midnight on 31st January each year) and pay your bill to avoid being charged a penalty.

For further guidance and resources to assist with managing your childminding accounts, please refer to our Accounts Pack.