Ministers are grilled about whether adequate impact assessment has been done, as numerous sector bodies warn that the digitisation initiative could imperil a vital profession already suffering from declining numbers
After warnings that the imminent expansion of the Making Tax Digital programme could put childminders out of business, a minister has said that government will “monitor the impact” of the new regime on those providing childcare services from their home.
Under the current system, childminders working from home are given a flat-rate allowance to cover wear and tear, in which 10% of their overall earnings are exempt from tax. MTD, which is becoming mandatory for hundreds of thousands of sole traders filing income tax self-assessment returns, removes this blanket allowance, with childcare providers instead required to record and claim for specific repair or replacement costs.
Last month, the leaders of a range of sector organisations representing childminders wrote to HM Revenue and Customs advising that the rule change “places a substantial financial burden on registered childminders” and warning that “we are already hearing from significant numbers of registered childminders who say that this change will be the final factor influencing their decision to leave the profession altogether”.
“We fear that this decision could accelerate the decline of the childminding workforce at a time when stability and growth are urgently needed,” the letter added.
The issue has been the subject of a number of parliamentary questions in recent weeks, including a recent enquiry form Liberal Democrat MP Vikki Slade, who asked whether government “is planning… to assess the potential impact of the removal of the wear and tear allowance within Making Tax Digital on the sustainability of the childminding sector” and the resultant impact on families.
In response, exchequer secretary to the Treasury Dan Tomlinson said: “The government will monitor the impact of MTD for income tax on childminders and other home-based childcare providers in the same way as it will for all sole traders moving to MTD for income tax.”
The minister pointed out “only a small proportion of childminders with qualifying income over £50,000 will be mandated into MTD for income tax from April 2026”.
The £50,000 threshold being applied this year will be respectively lowered to £30,000 and £20,000 in 2027 and 2028. Government expects that 780,000 sole traders and landlords will come in scope of MTD in April, followed by subsequent tranches of 970,000 and 975,000 in the coming two years.
“Childminders moving to MTD for income tax can continue to claim tax relief for household costs, wear and tear of household items and furniture, and food and drink, by deducting actual business costs,” Tomlinson added. “This ensures childminders receive tax relief for all of the costs that they incur in relation to their childminding business.”
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Separately, Conservative MP Andrew Snowden asked the Department for Education whether ministers had assessed the possible impact of the tax digitisation scheme “on the number of new childminders entering the profession”.
Early education minister Olivia Bailey’s response noted that “from April 2026, local authorities will be required to pass at least 97% of their funding directly to providers – an increase from 96%”.
“Under HMRC’s ‘Making Tax Digital’ system, childminders can still claim tax relief for things they buy, repair, or replace for their business, such as furniture, equipment, and household items. This change standardises the way that sole traders record and claim business expenses,” she said. “We are, however, aware of the strength of feeling amongst childminders and those who work with them. We have been talking regularly to Coram PACEY (the Professional Association for Childcare and Early Years), HMRC and others to understand the issue, the effect that it is having on the childminding sector and to make sure that the concerns of childminders are clearly understood. The department emphasises its strong support for childminders, who continue to provide high quality and flexible early education, and do so in a way that families across the country greatly value.”
With just weeks to go until the introduction of the new mandatory digital system, PublicTechnology recently revealed that, as of mid-February, that only one in 26 of the 780,000 taxpayers required to migrate to MTD this year are currently signed up to do so.
