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if nanny is ofsted registered, can you claim tax credits for childcare with her?

(16 Posts)
stella1w Mon 19-Sep-11 22:36:18

I've only ever used a nursery before and receive the childcare working tax credits for that. If I had a nanny, would I continue to receive them? (I now have two kids so think a nanny might work out about the same..)

nannynick Mon 19-Sep-11 22:50:51

Yes you can use childcare element of working tax credit to pay towards any registered childcare provider. In the case of a nanny, the amount can also include Employers NI plus the cost of running payroll. See WTC2 and WTC5 booklets from HMRC.

In WTC5 (pdf) it says:
If you employ someone as a registered or approved home childcare provider, for example a nanny, you can get help for up to 70 per cent of the gross costs of employing them – within the limits opposite. You can include:
• the costs of any employer’s National Insurance contributions you pay
• the costs of any benefits in kind you give and
• any other costs linked with employing that person.

For one child, the weekly limit is £175 * 70% = £122.50 For two or more children, the weekly limit is £300 * 70% = £210

I would be surprised if a nanny worked out about the same as a nursery place. Nannies I would say are a little bit more costly... though it will depend on many factors so it is possible that it may work out the same/less. Do make sure you have calculated all the costs you can think of, as with a nanny the salary isn't the only cost involved. See Nanny Cost Example for more info about some other costs to try to calculate and take into account.

stella1w Mon 19-Sep-11 22:59:09

nannynick, that is so helpful. Thanks. A nanny would cost me more than my gross salary! I must have been dreaming to think tax credits could help on the cost front!

nannynick Mon 19-Sep-11 23:12:16

Depends how much a nanny in your area costs. Some people on here feel my example calculation is on the high side. I'm in the South East so where I am costs are quite high. Have you looked into typical nanny salaries in your area, such as my looking on job listings sites like www.nannyjob.co.uk?

What would 2 x Nursery places be? I expect that will be quite a lot as well. It's the same tax credits limit for paying the nursery fees. Your max claim with 2 children will be 70% of £300, thus £210 per week - will that be enough to help cover the nursery costs?

nannynick Mon 19-Sep-11 23:21:08

This calc shows a nanny being paid £6.08 per hour, working a 50 hour week. That I feel is bottom of the salary scale, as £6.08 is the NMW figure for someone aged 21+ as of October 2011.

If you want to provide the start time, finish time, number of days per week I can modify that calculation to show it based on the number of hours a nanny working for you would be doing. If you can find out a typical salary figure for a nanny in your area, I could add that into the calculation.

I think if you have Google Docs, you can make a copy of the spreadsheet, then play with the figures yourself (though you will need to run the salary figures through the PAYE calculator that MrAnchovy wrote, to get the Employers NI).

stella1w Mon 19-Sep-11 23:32:21

I live in London and would need to pay at least 8 quid ph. And I would be out of the house from 8.30 to 6.30 four days a week. sigh.

Knackeredmother Tue 20-Sep-11 15:18:37

I use tax credits towards our nanny- it can be done! Really doesn't work out much more than nursery for 2 children for us.
With regard to the claiming for' benefits in kind', does anyone know what this means?

thecaptaincrocfamily Tue 20-Sep-11 15:33:19

Yes you can claim tax credits dependent on income and also vouchers if your employer does them.

RitaMorgan Tue 20-Sep-11 16:09:56

You wouldn't get a nanny for £8 an hour in London, more like £10-£12 gross I'd have thought, unless live-in.

nannynick Tue 20-Sep-11 16:37:54

Knackeredmother - I think 'Benefits In Kind' means things like Company Car, Private Medical Insurance, Employer contribution to personal pension.

Are you not already claiming the max amount (2 children, 70% of £300) and are thus looking for things to add to the expenses?

Knackeredmother Tue 20-Sep-11 17:22:15

Nick, no I'm not claiming the maximum amount but I do provide a car and I did wonder whether this would be relevant.
However, I won't be claiming as my income is about to rise so won't be receiving anything.

Knackeredmother Tue 20-Sep-11 17:23:05

Sorry to have hijacked op btw.

nannynick Tue 20-Sep-11 17:35:16

I think a car is a benefit in kind, so in theory yes it could go towards that. Though I feel if you were to do that you would need to get advice from an accountant who knows all about company cars, as I think it can get a bit complex. See HMRC: Cars

I wonder if MrAnchovy has written anything on here in the past about Benefits in Kind... he might have, possibly worth a search.

stella1w Tue 20-Sep-11 22:45:25

If someone is live-in, how does that affect their salary? Do you deduct an amount for room and board and do you pay their NI on the money element of their salary or the room etc as well??

nannynick Tue 20-Sep-11 23:37:40

You would probably want to involve them in family activities on occasion outside of their working hours. That way it is exempt (I believe) from National Minimum Wage legislation.

Otherwise, there is something called the Accommodation Offset - National Minimum Wage which is currently £32.27 per week. Can't say that I understand all about that... so click the link and see if you can make sense of it.

As far as I am aware, a live-in nanny would get a lower rate of pay than a live-out nanny. Taxation is then done on the Gross amount paid to the nanny. For tax credits purposes I think it would also be done on the Gross amount paid, plus employers NI and the cost of running payroll.

Worth asking an accountant... try giving a nanny payroll company a call to see if they can offer any advice on how to have a live-in nanny using childcare element of WTC to part-pay the cost of employing that nanny.

stella1w Thu 22-Sep-11 03:55:12

many thanks!

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