Nannytax

Becoming an employer for the first time can be a source of great concern. If you do not have a working knowledge of the tax system, the responsibilities and legal obligations involved can be both time-consuming and complex. Fortunately inexpensive, friendly, professional help is at hand. Nannytax offers a complete support service to parents and will not only take care of all your payroll responsibilities but will also guide you through any legal issues that may arise.

Businesses use skilled payroll, legal and human resources professionals. You can too – at a fraction of the price by subscribing to Nannytax (currently £260 including VAT for an annual subscription).

Legal Responsibilities

If you employ a nanny in the UK and you pay her more than £100 per week (tax year 2007/2008) you have the same responsibilities as a commercial employer and the law requires you to: 

• Register as an employer with HMRC
• Keep a payroll record and provide payslips on her behalf
• Pay Employee’s income tax and National Insurance Contributions
• Pay Employer’s National Insurance Contributions
• Provide an annual summary of all these deductions and payments

 These obligations also apply: 

• If your nanny earns less than £87 per week in your employment but more than £100 in total (e.g. if she has two part-time jobs)
• In short-term employment (i.e. a week or longer)
• To any employment taking place in the UK – irrespective of the country of origin of the nanny or employer

 As an employer you are also responsible for paying Statutory Sick Pay and Maternity Pay – but the latter may be reclaimed in full from the state.

Remember that National Insurance Contributions go towards your employee’s entitlement to unemployment and state pension benefits. Nannies are increasingly aware of their rights as employees and an employer who takes care of their nanny’s PAYE properly will be considered a good employer in this respect and enjoy the increased confidence of their nanny.

Net or Gross Wage

When nannies and nanny agencies agree a salary with the parents they often talk about the net wage – the amount the nanny has in her hand at the end of the week. But in reality the nanny is always paid a gross wage (net wage + tax + NIC), and on top of the gross wage the parents are obliged to pay employer’s NIC. Therefore there is a considerable difference between the net wage and the true cost of employing a nanny. Parents are advised to find out the true cost before agreeing on a net wage. Nannytax can help with these calculations; please don’t hesitate to contact us.

Nannyshares

Nannyshares are becoming increasingly common and they are particularly complex from a tax and NI perspective. At Nannytax we specialise in nannyshares and can help turn this hassle into peace of mind.

Penalties

Failure to register as an employer if you are paying your nanny above the weekly threshold is an offence, which can potentially lead to heavy penalties and career-damaging publicity.

Consider the following: 

• Failure to file employer’s annual returns by 19 May can result in penalties of £100 per month filed late
• Failure to pay all tax/NI liabilities before 19 April results in interest being charged on the amount outstanding

 Self-employment

With few exceptions (maternity nurses and nannies in continuous temporary employment), nannies simply do not meet HMRC criteria for self-employment. Even if your nanny has been granted self-employment status for another job, you should contact HMRC to check that her status is carried over to her job as a nanny; we would also recommend that you get confirmation in writing. If you take on a nanny who you mistakenly think is self employed it could result in fines, penalties or even a criminal record.

Also remember if liability to pay tax is not declared in full to HMRC and it comes to light, it is you, the employer, who will be pursued for payment, not your nanny. 

National Minimum Wage (NMW)

The current NMW is: 

• £3.30 per hour (gross) for employees aged between 16 and 17 (to increase to £3.40 on 1 October 2007)
• £4.45 per hour (gross) for employees aged 18-21 (to increase to £4.60 on 1 October 2007)
• £5.35 per hour (gross) for employees aged 22 and over (to increase to £5.52 on 1 October 2007)

Nannies who live as part of the family household are exempt from NMW.

 
If you have any further questions on this or anything else, please don’t hesitate to contact Nannytax on 0845 226 2203.

To work out your gross rate with a tax calculator, click on the following link.
http://www.nannytax.co.uk/parents/calculator.html