Beware of the dangers of doing it yourself!
Parental Choice is well aware that “doing it yourself” and sorting out nanny payslips and quarterly tax statements is not easy.
The fields of employment law and HMRC Tax are difficult whilst the HMRC tax tables are mind boggling at best especially if you trying to sort out your nanny’s pay if she is only part time or only working for you during the holidays. In addition to all that, with the introduction of Real Time Information (RTI) in April 2013, every employer has to now send details of any payment to be made to their nanny to HMRC each time they pay their nanny. RTI is meant to help enable employees’ tax codes to be up to date and to speed up the collection of the correct PAYE and NI such that there will no longer be a requirement to complete an annual return of PAYE and National Insurance (NI) contributions.
In additions, the Pensions Act 2008 now requires all employers to auto-enrol their employees in a qualifying pensions scheme by February 2018 which means an employer will have to make the relevant calculations and deductions from their nanny’s salary. For more information on pensions, please click here.
It is your (the employer’s) legal responsibility, not your nanny’s, to ensure that a PAYE (Income Tax) scheme is set up and that your nanny’s Income Tax and National Insurance contributions (NIC) are paid when due. It is also your responsibility now under RTI to send all details of your nanny’s pay, including PAYE and NIC to HMRC when you pay your nanny. If this seems too huge a challenge, our nanny payroll services can sort it all out for you. Please also remember that you have a legal obligation to provide your nanny with a payslip detailing all deductions made for PAYE and NIC as well as any benefits that she is entitled to.
Most nannies’ wages are agreed on a net basis (i.e. take home) pay, while all tax calculations are based upon gross pay. For further details, please refer to our Employment costs section and read the information on “Agreeing a Gross Salary”.
Please be aware the HMRC do not “turn a blind eye” on not declaring employment to avoid tax. This is a criminal offence which can potentially result in heavy fines! Not paying your nanny’s National Insurance Contributions (NIC) will also affect your nanny’s future pension and benefits entitlements within the National Insurance system and may affect her ability to get a mortgage or credit in the future.
In the event that your nanny has more than one job, you will have to declare this to your payroll service provider or to HMRC as it may affect the amount you can claim from her tax allowance and leave you paying more PAYE and NIC. If your nanny does have two jobs, tell Parental Choice and we can sort out the tax planning and make sure that you are not paying too much.
Obviously there are other alternatives to doing this yourself – using lawyers and accountants. You will find that the cost of these services far outweigh the cost of using Parental Choice.
Nanny Payslips & Quarterly statements
- You must provide your nanny with a payslip every time they are paid, whether this is weekly or monthly
- The payslip must show their gross wage, the Income Tax and National Insurance contributions paid on their behalf, as well as their net wage
- You must report any payments made to your nanny to HMRC each time you pay him /her
- Your nanny should keep their payslips safe. Payslips act as proof of earnings when applying for a loan or a mortgage
This can be time consuming for you to do yourself. Parental Choice can take this burden from you as part of our nanny payroll services. We can advise you on the tax system and arrange that this burden is taken off you.