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Nanny tax question

(8 Posts)
Spaghettivongole Fri 05-Oct-12 20:06:25

I'm thinking about taking on a nanny when I return to work next year and I am just trying to get my head around all the finances.

I've been using a "nanny tax calculator" online to get an idea of what the actual cost to me will be and I'm assuming a net wage of £10 an hour for 10 hrs for 2 days per week. When I input this (net salary of £200/wk) it give me a gross cost of £233 - so only £33 tax and NI? Can this be right?

BUT, if the nanny is working for the remaining 3 days (which I'm assuming most would) then does this mean she'll end up in a higher tax bracket therefore I'll need to pay more tax for my 2 days? The gross amount for 5 days would be £735 so if this is prorated that would be £294. That's a difference of £264 per month so quite significant!

If there are any financial wizzes out there that I haven't bored to death, I'd appreciate your advice!

SamSmalaidh Fri 05-Oct-12 20:16:38

Forget about net and agree a gross amount, then it doesn't matter if she has another job.

ceeveebee Fri 05-Oct-12 20:29:03

If she has another job, then her tax code (the amount she warns before tax) may be given to that employer. This depends on who employed her first but I think she can apply to have her code split between you or given to you instead. The tax calculator will assume that you have her whole tax code.
If you do not have her code in full or in part you have to apply a code called BR which means she pays basic rate tax on the whole of her salary from you (22%) plus any relevant NI. I get this to be £286 per week on Me Anchovy's calculator using code BR
As Sam says it is really important to agree a gross rate especially for part time nannies otherwise changes in her other job can affect you.
Hope that makes sense!

ceeveebee Fri 05-Oct-12 20:30:06

warns = earns
Me Anchovy = Mr Anchovy

Spaghettivongole Fri 05-Oct-12 20:36:30

Thanks Sam and ceeveebee. The advice to advertise a gross amount makes sense and I hadn't realised that was possible. I guess the nannies who apply will take into account what that would be net based on their current circumstances and then we can agree an amount based on that. But anyway, at this stage I'm just trying to price all my different options (nursery, nanny, etc) and so maybe I'll assume the basic tax rate to give me an idea of cost. Aargh it's complicated!

I'm guessing that paying cash-in-hand for 2 days per week isn't recommended...? I know friends who've done this but I think it would make me uneasy.

SamSmalaidh Fri 05-Oct-12 20:50:18

Deducting tax and NI from an employee's salary is a legal requirement, so you would be risking being caught and fined by HMRC if you failed to do so. Also how would your employee claim JSA or SMP if you didn't pay her NI?

ceeveebee Fri 05-Oct-12 20:57:45

I also know people who only declare part of the salary. But don't advise it for reasons explained by Sam

nannynick Fri 05-Oct-12 21:30:17

MrAnchovy's PAYE Calculator just in case a link was needed. It will let you play with the figures a bit to see how changing say the taxcode changes your cost if you were to agree a Net salary, and what changes there are if you agree a Gross salary.

Why take risks when the costs for you are not that high. If you were to agree a Gross salary of £250 a week, your Employers NI is currently £15 a week.
Remember that your costs in terms of salary is the Gross Salary plus Employers NI, plus optional payroll admin charge (such as if you used a payroll agency to produce the payslips for you). The Employee income tax and Employee NI figures are things that are DEDUCTED from your employee and sent to HMRC - they are part of the Gross salary.

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