Paying Tax & N.I.
Historically most nannies have been employed on a full-time basis, however in these unsettled times part-time employment is much more common and nannies may have to consider working for two or even more families to make up a full working week.
With this changing trend comes the inevitable question of who gets the personal tax-free allowance. As an employer you need to be aware that only one family can take advantage of the nanny’s full tax-free allowance (see current rates and thresholds for this year’s tax allowance), and whilst it’s common practice for the employer where nanny works the most hours to get the benefit of this allowance, it does belong to the nanny, and so she is free to decide what to do with it. It is also possible to split the tax code proportionately between two or more employers (see nannysharing made easy), providing nanny gives consent.
You must also bear in mind that although you may only employ your nanny one day per week and pay her below the current threshold, you must consider her total weekly earnings as it is this amount that determines whether tax and N.I. has to be deducted or not. It is your responsibility to establish the nanny’s weekly work pattern, because if you don’t you could face hefty penalties. Feigning innocence or turning a blind eye is not worthy excuses in the eyes of HMRC.
Agree a gross and protect your total cost
Nannytax recommends that all pay arrangements are made on a gross basis. There are many reasons why you should do this. It’s especially important to agree a gross wage if you are in a nannyshare. A gross pay agreement will automatically protect your total cost, and so it doesn’t matter if the current share dissolves or if you fall out. If you agree a gross wage the communication between you and the other family can also be kept to a minimum.
Tax code splits
If you have agreed a net wage with your nanny Nannytax recommends that her tax code is split. A tax code split means that the nanny’s tax code is split proportionately between her jobs. It is a very straight-forward exercise, mainly because our nannyshare team deals directly with a tax code specialist at our dedicated tax office, but before a tax code split can be applied we need approval from the nanny.
How does it work?
Both employers submit the details of the share arrangement to our nannyshare team
We then send a letter to the nanny outlining the arrangement and the proposed tax code split, which nanny needs to sign and return to us
Once we have received nanny’s approval we fax the request to our specialist at the tax office
The new tax codes are normally notified to us within 48 hours