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Calculating tax for nanny with 2 jobs.

(56 Posts)
OuchyMcOuch Sun 08-Jun-14 21:21:59

We're just working out what the total we'll be paying our nanny will be. She will work part time for us, and part time for another family (15 hrs a week with us, 15 hrs a week with the other family). Both jobs will pay below the threshold for tax, but together they will pay above the threshold.

Who is responsible for working out the tax? Dh says it would be up to the nanny to complete a self assessment, as it's unfair that we have to pay her tax as the pay we give her is below the threshold for tax. However, I'm sure I've read loads on here about families having to split the tax free allowance. Who's right?

Picturesinthefirelight Sun 08-Jun-14 21:33:05

Whoever employs her first will get her to fill out a P46 stating that it us her main/only job. Assuming she earns below the threshold on that job they won't have to deduct any tax

She will fill out another P46 for whoever employs her second stating that she already has another job. HMRC will then either put her on Basic Rate for the whole amount she earns (& she'll claim back any overpayments at the end if the tax year) or they might adjust her code so she only oats tax on the amount over the personal allowance.

She can if she wishes write to the tax office asking for her allowance to be split equally between the two employers. In which case they will issue you both with the correct code.

Picturesinthefirelight Sun 08-Jun-14 21:33:55

Nannies cannot be self employed in the circumstances that you describe so it can't be done by self assessment.

Picturesinthefirelight Sun 08-Jun-14 21:34:49

So it is very very important to agree a gross wage with her, not a net one.

I can't stress that strongly enough.

OuchyMcOuch Sun 08-Jun-14 21:38:10

But self assessment isn't only for the self employed is it pictures?

That does help a bit....I'm still a bit unsure, we'll be paying her similar amounts as her other employer, it does feel a bit unfair that we have to pay all the tax on her earnings and her other employer pays nothing - we're both paying £12 net per hour but the total cost to us will be much higher as we're paying all the tax.

OuchyMcOuch Sun 08-Jun-14 21:38:46

Oh god, tell me about it. What is this obsession about net pay????

OutragedFromLeeds Sun 08-Jun-14 21:41:58

Agree a gross wage with her and then, not only will you be on the right side of the law, but you'll know exactly how much you'll be paying her regardless of what happens with her tax.

You can use agencies like nannytax or payefornannies to work this out for you/issue payslips.

Picturesinthefirelight Sun 08-Jun-14 21:42:37

Self assessment is also for people who have other firms if income such as rental, interest on savings, investments etc etc.

But if someone is employed as a nanny has to be, the employer is obliged to deduct tax & national insurance via PAYE.

Baabaapinksheep Sun 08-Jun-14 21:43:30

But you aren't paying her tax, you are deducting it from her pay and paying it over to hmrc.

As above, it is often the second employer who will deduct tax if that job pushes the employee over the threshold. However it is also common for hmrc to issue new tax codes so that the personal allowance is split in half, so that tax is deducted by both employers.

Picturesinthefirelight Sun 08-Jun-14 21:45:32

Tax codes are so variable too. For example the government, as happened a few years ago could decide to change the tax bands & suddenly you are liable for lots extra if you have agreed net.

Have you drawn up a contract yet? I'd wirk out what the gross would be based on a normal tax code. & tell her that you have converted her rate based on that.

Don't agree net, it's madness.

fledermaus Sun 08-Jun-14 21:45:32

She pays her tax, not you - you just deduct it from her wage. It would be foolish of you to promise her a take-home amount when she is only working for you part time.

Parietal Sun 08-Jun-14 21:46:53

sign up to a company like nannytax.co.uk - they will sort the whole thing out for you (for a fee, but worth it!).

Picturesinthefirelight Sun 08-Jun-14 21:48:13

Hmrc wont split the code however if the first employer isn't registered for PAYE & if you have no other employees (as most nanny employers wouldn't) & your only employee earns under the threshold you don't have to register as long as you keep a copy if the P46 stating that.

nibbers Sun 08-Jun-14 21:49:43

Have done nanny shares, been one of 2 employers and been sole employer. Have had sick pay and maternity pay to do.

I pay 120 a year to a payroll company who sort it all, including any overtime. Utter bargain.

OuchyMcOuch Sun 08-Jun-14 22:01:48

pictures We haven't agreed a contract yet, but I will gross up her salary for that, thanks for that. I hadn't thought about what if the tax bands change - what with an election next year, possible change of government, I don't want to take any chances.

I realise she will be paying her tax, but the cost to us will be higher than to the other family, as they are paying her just the £9,000 a year. We'll be paying £9,000 a year plus tax and NI.

Dh is going to put a call in to HMRC tomorrow, but I definitely think the way forward is to agree a gross salary. I don't want to lose her, she's perfect and the days and hours we need her fit in perfectly with the degree course she's doing.

OutragedFromLeeds Sun 08-Jun-14 22:07:27

You WILL NOT be paying her tax and and NI unless you are foolish enough to agree a net wage. If you agree a gross wage tax could go up to 99% and you will pay not a penny more than you agreed.

The other family and their agreement are none if your business. If they are silly enough to agree a net wage they will pay extra on top. If they agree gross, they will pay just the amount they agreed.

Cindy34 Sun 08-Jun-14 22:09:31

Agree a gross salary. Why would the cost to you be higher? Employers NI is based on what they earn in each employment, not combining employments.

P46 isn't used any more, think it got replaced with a new starter form. Have a look on hmrc website about taking on a new employee. If you are the first employer and you are paying below the NI threshold, then you may not need to register as an employer. If you are the second employer, you will need to register. So it will cost you more in terms of time taken to do payroll. Is that what you mean by costing you more? You could outsource to a payroll company but you don't have to.

The vital thing is to agree a gross salary, not a specific take home salary, as too many things can change with taxation over time.

Picturesinthefirelight Sun 08-Jun-14 22:12:01

It's still a P46 if you arnt on RTI as you arnt registered for PAYE.

Cindy34 Sun 08-Jun-14 22:13:01

9000 a year, that's over the lower limit isn't it? So you would be registering as a employer regardless.

Cindy34 Sun 08-Jun-14 22:15:25

Pictures, presumably if they register as an employer assuming they are not already an employer, then woudn't hmrc make them do rti? Or is there some thing that replaced the simplified scheme, so not having to do full paye?

OuchyMcOuch Sun 08-Jun-14 22:18:10

Definitely going to agree gross salary. It's just working out what's a fair gross salary if she's asking for £12ph net for 15 hours a week. If it was just us employing her then her net and gross would be the same because she'd be below the threshold for tax and we could say to her we'll pay you £9,000 pa gross. But if she's employed elsewhere then technically her net and gross salary would be different as she'd have to pay tax on what she earned from us.

OuchyMcOuch Sun 08-Jun-14 22:18:40

What's RTI?

OuchyMcOuch Sun 08-Jun-14 22:19:29

Cindy... When you say the lower limit, do you mean for tax? I believe it's £10,000.

OutragedFromLeeds Sun 08-Jun-14 22:21:50

You can still pay her �9000 gross. It's her choice to take a second job. She must understand that we live in a country where you have to pay tax?! It's really not your issue. Find nanny, agree gross wage, pay nanny and HMRC. What the nanny does re. other jobs is entirely up to her/the other family.

Cindy34 Sun 08-Jun-14 22:24:53

RTI is their new computer thing that should get paye right I think. It means employers report the pay each time pay is done, rather than telling hmrc every 3 months. It's all done online.

Net to gross is horrible.

I wonder if you could calculate something reasonable by multiplying up and using a paye calculator to get the gross.
So doing it on 45 hours, only job, assuming 1000L taxcode.
Then use that for the gross hourly rate, would that work?

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