Can I claim childcare as a business expense

Q: What mistakes do self employed parents make?

Putting nursery fees through the accounts. If they are in your bookkeeping, they belong in the disallowable column and must be added back. Paying relatives for childcare as "wages". The payment is private whatever it is called, and the relative may have taxable income of their own. Assuming a low first year rules out Tax Free Childcare. A business under 12 months old is exempt from the minimum income test. Forgetting to reconfirm. Tax Free Childcare stops if you do not sign in and confirm your details every three months. Guessing adjusted net income. A profit forecast that drifts over £100,000 can mean repaying support you were not entitled to. For the costs you can claim, see what expenses a sole trader can claim. If HMRC opens a check into your return, tax investigation insurance pays your accountant's fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

No. A self employed person cannot deduct nursery fees, childminder costs or a nanny’s wages from business profits, because the cost serves a private purpose, looking after your children, as well as letting you work. The support available instead comes from outside the tax computation: Tax Free Childcare, free childcare hours in England, and the childcare element of Universal Credit.

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Why is childcare not an allowable business expense?

A sole trader or partner can only deduct costs that pass section 34 of the Income Tax (Trading and Other Income) Act 2005: the expense must be incurred wholly and exclusively for the purposes of the trade. Section 34(2) lets you claim an identifiable business part of a mixed cost, but childcare has no separate business part. The whole cost buys care for your child.

Childcare does not appear in any of HMRC’s lists of allowable costs for the self employed. GOV.UK groups allowable expenses as office, travel, clothing, staff, stock, financial, premises, advertising, subscriptions and training costs, and the table in helpsheet HS222 follows the boxes of the self employment pages. Nothing in either covers the care of the trader’s own family.

HMRC’s Business Income Manual explains why some costs fail however they are presented. BIM37900 describes expenditure with an “intrinsic duality of purpose”: costs which by their nature always carry a private purpose, so HMRC does not have to prove what was in the trader’s mind. Its list includes ordinary clothing, food, somewhere to live, health and “helping one’s nearest and dearest”. Paying for the care of your own children sits squarely within that reasoning.

Does it help that I only pay for childcare so that I can work?

No. This is the argument most people reach for, and the courts rejected the same reasoning for clothing. In Mallalieu v Drummond [1983] 57 TC 330, summarised at BIM37910, a barrister bought plain clothes only because the Bar required them and never wore them elsewhere. The House of Lords still refused the deduction. Lord Brightman said that if the object of spending is to serve the business and another purpose, it is immaterial that the business purpose is the predominant one.

The same logic applies to a nursery place. It lets you work, but it also provides for your child’s care, and that second purpose is inseparable from the first. Working more hours, working from home, or describing the cost as “business support” does not change the answer. Our page on the wholly and exclusively rule covers the test in more depth.

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Can I put a nanny or family member on the business payroll?

Box 19 of the self employment pages covers wages and staff costs, but the SA103F notes say payments for non business work are disallowable and must be added back. A nanny who looks after your children is doing domestic work for you as a parent, not work for your trade, so the wages do not become deductible because they are run through the business bank account or payroll. The same applies to paying a grandparent or older child to provide childcare: the label “wages” does not make the payment a trade expense, and an HMRC enquiry will look at what the work actually was.

What about childcare I provide for my employees?

This is the one area where childcare can be a business cost. If you employ staff, box 19 includes “benefits for employees”, so the cost of childcare you provide for them is part of your staff costs. For the employee, section 318 of the Income Tax (Earnings and Pensions) Act 2003 exempts workplace nursery places, subject to conditions. EIM22003 says the premises must not be used wholly or mainly as a private dwelling and must meet any registration requirement, so a nanny in the employee’s own home or care at a childminder’s home is outside the exemption.

None of this reaches the sole trader personally. The exemption is for employees, and your own drawings are not staff costs. If you trade through a limited company the position is different, because a director can be an employee of the company; see employer supported childcare for how those rules work.

What help with childcare can the self employed get instead?

Tax Free Childcare

Tax Free Childcare is open to self employed parents on the same terms as employees. For every £8 you pay into an online childcare account, the government adds £2, up to £500 every three months per child (£2,000 a year), or £1,000 every three months (£4,000 a year) for a disabled child. The child must be 11 or under, or 16 or under if disabled, and the provider must be registered and signed up to the scheme.

You and any partner must each expect to earn at least the National Minimum Wage or National Living Wage for 16 hours a week over the next three months, which GOV.UK currently gives as £2,643.68 for those aged 21 or over. Two rules help the self employed. If your business started less than 12 months ago, it does not matter how little you earn. And if your income is irregular, you can use an average of what you expect to earn over the tax year instead of the next three months. You need your Unique Taxpayer Reference to apply and must reconfirm every three months. Full details are on our Tax Free Childcare page.

Free childcare hours

In England, working parents of children aged 9 months to 4 years can get 30 hours of free childcare a week for 38 weeks of the year through Free Childcare for Working Parents. The self employed qualify under the same income tests, and HMRC checks Tax Free Childcare eligibility at the same time. Scotland, Wales and Northern Ireland run separate schemes.

Universal Credit

If you claim Universal Credit you can get back up to 85% of registered childcare costs while working, subject to monthly caps. You cannot receive Universal Credit and Tax Free Childcare at the same time, so GOV.UK suggests using its childcare calculator to compare them.

How does the £100,000 income limit affect a self employed parent?

You cannot get Tax Free Childcare or Free Childcare for Working Parents if you or your partner expect adjusted net income over £100,000 for the current tax year. Adjusted net income is total taxable income less certain reliefs, including trading losses, the grossed up amount of Gift Aid donations and the grossed up amount of personal pension contributions. Above £100,000 the personal allowance is also reduced by £1 for every £2 of excess, as explained in personal allowance tapering.

Illustration only. A sole trader expects profits of £104,000 for 2026 to 2027 and has no other income. She pays £4,000 into a personal pension. With basic rate relief added at source, the gross contribution is £5,000, reducing her adjusted net income to £99,000. She is back below the limit, keeps her full personal allowance and can apply for Tax Free Childcare if she meets the other conditions. Because adjusted net income is based on the whole year, a self employed parent near the limit needs a realistic profit forecast before confirming eligibility. Our page on pension contributions for business owners explains how the relief works.

What mistakes do self employed parents make?

Putting nursery fees through the accounts. If they are in your bookkeeping, they belong in the disallowable column and must be added back.
Paying relatives for childcare as “wages”. The payment is private whatever it is called, and the relative may have taxable income of their own.
Assuming a low first year rules out Tax Free Childcare. A business under 12 months old is exempt from the minimum income test.
Forgetting to reconfirm. Tax Free Childcare stops if you do not sign in and confirm your details every three months.
Guessing adjusted net income. A profit forecast that drifts over £100,000 can mean repaying support you were not entitled to.

For the costs you can claim, see what expenses a sole trader can claim.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.