Paying UK Tax and National Insurance – a Guide for Nannies & Employers – London Governess

Paying UK Tax and National Insurance – a Guide for Nannies & Employers

You hire a nanny to take care of the most important thing in your life – your child. In return for this, you provide your nanny with somewhere to stay, the use of your house, and of course, you pay them. How do you organise this? You can’t just hand over a handful of cash every week. In the UK, when you pay your nanny, there is tax and national insurance (NI) to pay. Do you know how to do this? 

The Nanny’s Point of View

Seeing this from the nanny’s point of view – you take a position with a family to carry out your role as nanny. You agree on the salary and everything else, and you assume that everything will be done correctly. After all, you are quite likely going to give up where you currently live, maybe even come to the UK from abroad. You don’t want to get in trouble with HMRC and you might not have any idea about paying tax yourself. 

Employees expect to be paid for their work at a predictable time. We buy things online, promise to pay others for things, and time things just right because we know our wages will be there in the bank on a specific day. And we don’t expect to have to sort out our own tax and NI, that is usually for the self-employed. As employees, it should be done for us.

Your Responsibility as the Employer

When you hire a nanny, you become an employer. It’s not like having a big company full of staff, there are no products to sell, no production line in your home, but you now have the same responsibilities as any other employer, whether it’s a thousand employees or just the one nanny. You, the employer, are responsible for making sure that when you pay your nanny, you pay the necessary amount of tax and NI. 

Did you know that changes to the Pensions Act means you have to provide a workplace pension to your employees? Workers are now automatically enrolled into the scheme, and the act includes families that hire nannies.

It doesn’t matter if the nanny you employ is British or foreign and only living in the UK temporarily. Anyone working in the UK is subject to tax and NI. Some people will pay less than others, and some will get all the tax they pay given back to them. Never the less, it still has to be paid in the first place.

You have hired a nanny probably because you are busy and need help keeping the house in order. Will you have the time every week or month to sit down and deal with this admin task? If you don’t pay your nanny’s appropriate tax and NI, you and possibly your nanny could get in trouble. It simply has to be done. It protects you and your nanny from the serious problems you could suffer if you don’t organise it. 

As the employer it’s your responsibility for making this all go very smoothly.  Learning how to do it yourself could be very time consuming and involve paperwork that you don’t have time to deal with. Your nanny might have a student loan or other debt repayment programme that needs to be incorporated and dealt with. Do you understand tax thresholds and the various tax codes? It can be very complex. But there’s no law that says it has to be you personally who deals with it. Maybe you have an accountant to organise your tax and expenses. In the same way, you can get someone else to deal with paying the nanny’s tax.

Who will sort out my nanny’s tax?

Yes, the good news is that there are companies that specifically deal with paying the salary, tax, and NI for nannies. They actually specialise in doing this for nannies. So, the whole thing can be passed on to someone else who will handle it all. There are now several companies specialising in payroll service provision for nannies. Of course, services are not free and prices can vary. But as with anything in this world, you often get what you pay for. 

At London Governess we have placed nannies with well over a thousand clients over the years. Some of them handled payroll themselves, and the rest used payroll service providers. As a result, we have heard numerous reports about how these companies performed for the nannies we provided. We’ve heard all the complaints, the things that have gone wrong, mistakes that were made, and we’ve heard plenty of praise about those who got it right consistently.

It’s not our purpose here to name the companies that got things wrong; everyone deserves a chance to learn from mistakes and make improvements. But we can point out one payroll service provider that we regularly hear good things about and as a result recommend to our nannies, and that is

What can do for me?

You are busy, we know. This is why you hired a nanny in the first place. But hiring a nanny then brings you some extra admin work that you don’t have time to deal with. Nannytax will handle this for you and make sure you are complying with HMRC requirements. 

When you first hire your nanny, you will need to provide her with an employment contract that states her duties, salary, working hours, and anything you will provide. You can send nannytax this contract so that they can see for themselves the situation and then work out exactly what needs to be done. If you don’t know how to create a contract, they can even do this for you for free. 

Your nanny will be entitled to paid holiday, and sick pay if necessary. All of these things can be handled for you. It takes the admin burden off you and also gives you the peace of mind to know that it will be handled correctly and without mistakes that can cause big problems.

What else can they provide?

Have you considered liability insurance? If someone is injured while working for you, this could be invaluable. Nannytax can help with this. They can also help you get emergency child care should your nanny be called away or unexpectedly unavailable for any reason. You can get HR support and even have payslips produced. The company has been going since 1993 and has grown considerably. If there’s an area of employing a nanny, the contract, salary, or tax calculation you want to know about, they cover it.

When should I contact a payroll service provider?

As soon as you know when your nanny is coming to work for you, you should get in touch. These companies are good but cannot work miracles, so give them time to prepare things. Don’t wait until the day the nanny turns up at your door, that would be too late.

You cannot ignore your responsibility

If you didn’t already know you had this responsibility, you might now feel that you’ve got an intimidating admin task on your hands. But you will also be aware now that it need not be the heavy, time-consuming work that it could be. There are others who will do the job perfectly for you while you get on with the things that already keep you busy. If you were already aware of the requirements, maybe now you can breathe a sigh of relief, knowing that it doesn’t have to be your job to do it. 

Whether you learn how to navigate the intricacies of tax or use a payroll service, it’s good to get everything right. Your nanny will be thankful that her pay turns up when she expects it and that it is correct.