Last reviewed: 8 August 2026
Quick summary
- Give every payment a purpose code: refundable deposit, non-refundable charge, retainer, childcare fee, funded-hours remittance, private top-up, credit or refund.
- Retain the agreement that explains the purpose and the later document showing whether the amount was refunded, applied to an invoice or retained under the agreed terms.
- For funded hours, reconcile the local-authority remittance to child attendance, period covered and parent-paid extras. Do not turn a funding payment into a vague “government income†entry.
Part of Making Tax Digital by business type.
Direct answer
Do not let a childminder payment become “income†simply because it lands in the bank. The first question is what the agreement says it is for. A refundable deposit held to secure a place, a retainer for a holiday period, a fee for sessions already delivered, a local-authority funded-hours remittance and a parent-paid extra all have different evidence and timing. Your records should preserve that purpose before anyone tries to decide final tax treatment.
For MTD, the digital record needs clear income and expense evidence. HMRC's current guidance says childminders within MTD follow the standard rules for digital self-employment records, while attendance and cash records remain useful support. A payment-purpose register makes that much easier: it provides one short explanation for each unusual receipt, with a link to the contract, invoice or remittance behind it.
Funded-hours arrangements are local and contractual as well as administrative. Keep the provider agreement for your authority and the payment schedule for the period. Do not use an internet post or another area's policy as proof of what your own contract permits. The tax record is not a replacement for a clear parent agreement or funding claim.
Create a payment-purpose register
Use a compact monthly sheet with eight fields: child reference, money received date, amount, purpose code, period or place covered, source, document link and next action. A GBP 200 payment can then read: “C18, 12 May, GBP 200, refundable place deposit, starts September, parent transfer, contract clause 4, apply/refund when agreed.†That is much safer than trying to recall the reason for a payment at the end of a busy year.
Do not over-engineer the list. The purpose codes can stay short: DEP for deposit, RET for retainer, FEE for childcare delivered, FUND for local-authority funding, EXT for a parent-paid extra, CR for credit and REF for refund. The value lies in linking the code to documents. When a child starts, the deposit may be applied to a first invoice or refunded; record that movement. When a place never starts, retain the parent communication and contract term alongside the refund or retained amount.
Care to Learn guidance is a helpful reminder of the evidence principle: it refers to auditable records for provider deposits and summer retainers. It does not set the rules for every childminder contract, but it shows why the payment purpose and the evidence of any extended payment period matter.
Reconcile funded-hours income without mixing it into private fees
Funded hours may be paid on a schedule that does not line up with your monthly parent invoice. Start with the funded-hours attendance or claim record: child reference, hours, term or period, rate or remittance basis and any adjustment. Match that to the local-authority remittance. Then reconcile the child's private invoice for sessions, meals, outings or other agreed extras that the funding did not settle.
Keep a separate column for timing differences. A September remittance may be paid in October; an adjustment may reverse part of an earlier amount; a child may leave or change settings during a period. The point is not to state a universal funding rule, because local arrangements vary. It is to retain the payment schedule and give the accountant a transparent bridge between hours delivered, claim made, money received and any parent balance.
Where funding is spread across more weeks than the headline entitlement, retain the contract or parent fee schedule that explains the calculation. Readers are often tempted to make the bookkeeping match a parent's monthly payment. The accounting file should instead show the actual period and payment source, even when that means two lines rather than one neat total.
Three payment stories, three different records
- Refundable place deposit: a family pays GBP 150 in June for a September start. Save the signed contract and code it DEP. In September, record whether the agreement applies it against the first invoice or requires it to be returned.
- Summer retainer: a family pays to hold the place during a holiday period. Keep the retainer clause, payment, period held and later return-to-care record. Do not code it as an ordinary July fee without the agreement.
- Funded-hours child with meals: the authority remits the funded amount, while the parent pays meals through Tax-Free Childcare. Keep the attendance/funding schedule, remittance and the separate parent invoice; both relate to the child but not to the same income route.
These situations are why a childminder needs more than a generic income column. A small purpose register lets you preserve the commercial story without making family administration more intrusive than it needs to be.
Records to keep
- Parent contracts showing deposit, retainer, cancellation and refund terms.
- Payment-purpose register and relevant bank receipts.
- Invoices showing care period, funded hours, private hours and extras.
- Attendance registers, local-authority claim evidence and funding remittances.
- Parent communications about changes, cancellation, refunds or credits.
- Tax-Free Childcare payment references where used for private balances.
- Expense receipts and your MTD software export or cashbook.
Use a secure child reference in the accounting summary. Keep names, contact details and sensitive childcare records in the operational system that needs them, not copied into every bookkeeping note.
Common mistakes
Do not count a deposit when received and again when it is applied to an invoice. Do not let a refund vanish from the income summary. Do not merge a funded-hours remittance and a parent top-up because both came in during the same week. Do not assume a payment is non-refundable because it is called a “depositâ€; read the agreement and keep the evidence.
Another problem is ignoring a funding adjustment after the original payment has been reconciled. Keep a dated adjustment line and link it to the original claim. This makes the quarterly figure explainable and reduces the chance of an accountant treating a genuine correction as unexplained missing income.
Questions to take to an accountant
- How should the register show refundable deposits, retained amounts and later applications to fees?
- What documents do you need to review a retainer or cancellation outcome?
- How should I reconcile funded-hours remittances that cover a different period from parent fees?
- Which income headings should feed my MTD software, and which should remain supporting notes?
- How should I record refunds, credits and late local-authority adjustments?
- What records do you need for childminder home, food and activity expenses each month?
Useful related guides
Key takeaway
For childminders, the important distinction is payment purpose. Code and evidence deposits, retainers, fees, funded-hours payments, extras, credits and refunds separately. Then a quarterly total is supported by contracts, attendance and remittances instead of a bank statement that cannot explain what each receipt means.
Sources checked on 8 August 2026
Frequently asked questions
Is a childminder deposit automatically income when received?
Do not assume from the bank payment alone. Keep the contract term explaining whether it is refundable, applied to a future fee, retained for a place or forfeited in stated circumstances, then ask an accountant how it should appear in your records.
How should funded-hours income be recorded?
Keep the remittance, funded-hours attendance or claim record, child reference, period covered and parent-paid extras separately visible. Retain your relevant local-authority provider agreement.
What is the difference between a retainer and a fee?
The contract and payment purpose matter. A place retainer, refundable deposit and fee for childcare already delivered should not be merged into one unexplained income entry.