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Nanny share tax - help(14 Posts)
We have agreed to do a nanny share. A friend has a great nanny who they no longer need for as many hours. The nanny would mainly look after each family's children separately but once a week after school together and 3 days a week together in school holidays. We have agreed to pay a single family rate and 2 family rate. We would pay 45% of the overall cost and they would pay 55% of the cost. The other family currently pay her and have a nanny tax account. Should we register as a separate employer or simply pay the other family who will administer things as main employer?
This seems so complicated.
Do you know how much gross salary nanny will earn from their current employer?
Have you agreed a gross salary?
Each family is registered as an employer individually and you agree a rate for sole care and a rate for shared care with a split percentage for the shared care - is this your 45/55?
It does sound complex but having a spreadsheet setting things out can help make it clearer. It can help to use the same payroll company as the current family, as they can then see the payroll for both of the nannies employers.
HI Nick, nothe current employer has previously talked about Net salary and calculated what the net salary for each family would be. I know they do pay tax NI etc. They have 3 children, we have 2 children so for the shared sessions they have proposed paying 60% of the cost and we will pay 40% of the cost. The 55% / 45% that I mentioned is the proportion of her NET salary that we would each pay which is £30 K per year approximately.
Do you think being a separate employer would be less expensive for us?
Talk to their payroll provider. With net pay it will be trickier as working for you the nanny would have no personal tax allowance to use.
Being a separate employer will help reduce Employers NI and employee NI and is usually how nannyshare are done. You need to be able to account for the money you pay so you want to be paying the nanny direct, not paying the other family.
Have they said anything about splitting tax code if it is done as two jobs?
If you are paying 45% of £30,000 net then having 45% of the nannies tax free allowance would be reasonable.
We have a part time nanny who has another job in the days she's not with us. We use a nanny payroll company (WaytoPaye) for her payslips/tax etc as the tax codes were too complicated for me to be confident I'd get right.
Has the other family been an employer long? You need to also consider what happens when the nanny becomes eligible for auto-enrolment pension.
As a new employer you would not need to contribute until towards end of 2017, or Jan 2018 (if registering as an employer on 1st Oct 2016 or later).
Right so it sounds like we need to be a separate employer. They have employed her for 18 months. She is an EU national if that makes any difference??
Did they have any nanny before then?
If they started being employers in March 2015, then pension starts August 2017.
I would agree a Gross salary (so you don't end up paying employees pension contribution, or have your total costs change when tax codes change, plus your nanny gains if personal tax allowance increases) based on 55/45 split.
This spreadsheet shows how this would work along with some other examples. Grossing up (when changing from Net pay agreement to Gross pay agreement) is based on £30,000 Net pay with 55/45 split.
Spreadsheet (Google Sheets): docs.google.com/spreadsheets/d/1oZFTWQww675-dqIImaT-R4j-5Q4bpXvxtcd_OPqSNUE/edit?usp=sharing
Your payroll provider should be able to do a spreadsheet for you based on our precise figures. NannyTax and NannyPaye are the biggest providers.
Be careful about being an individual employer in this type of scenario.
HMRC have clear guidance for NIC purposes when there is a "shared resource" see
www.gov.uk/guidance/what-to-do-if-your-employee-has-more-than-1-job for further help.
Doctoratsea - interesting document, have not known HMRC to apply that to domestic employers. Looks like they could do but they might then find that they are challenged on the Employers Allowance exemption.
Sorry I have had a difficult few days but I did want to come back and say a big thank you thank you for your time and advice.
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