are you exempt from tax and NI if nanny is self-employed?

It is the employers responsibility to extract the money from nanny's paycheque and send it off to the IR. So, if employer doesn't do this, I expect employer is in trouble. As for who actually owes the money if caught,I don't know. Wouldn't ever put myself in the position of finding out.

I've not read all posts, so forgive me for repeating anything,

Nannies cannot be self-employed. Be warned. She probably wants to keep getting some sort of benefit or tax credit or another, so far as i am aware as a nanny for 13 yrs is that it is the employers responsibility to pay tax and ni, if you are found to not be doing so, i have no idea what the repercussions are. Look here for information:

www.nannytax.co.uk

Re the one family that could be full time or part time hours.

I am a temp nanny and maternity nanny and as such it is legal for me to be self employed.

A normal nanny is not able to be self employed.

If i work for more than a few months with one family then i am classed as employed by them.

Be Ware.

Hmm - if you tell the ESI that you have a nanny 9rather than a domestic worker) and then answer the questions then you get a message that the employment status cannot be determined. Whilst many nanny contracts (esp full-time) will be contracts of employment it does not follow that all nannies are employees.

mommie, i only pasted the link in case it was of some help, not to tell you off for covering old ground, honest!

i agree with you that nursery is much, much easier - or at least it has been for us.

Good news from HMRC. The new Employers CR-ROM has a P11 calculator, which works out Tax and NIC every time you pay your employee.

See the February 2006 Bulletin for details - online version - employers will be sent hardcopy plus the new CD-ROM.

It would be nice if the Government made it easier for employers who only have one employee, but alas it probably can't be made any easier than it already is.

For those of you considering employing a part-time nanny (thus who would earn less than £700 a month) then you could use the Simplified PAYE Deduction Scheme details

With regard to Self Employment, HMRC have a new tool for helping decide if someone is Employed or Self-Employed: Employment Status Indicator Note: a Nanny is a Domestic Worker, in HMRC speak!

I have just been though the ESI putting in info as a parent seeking to have a nanny. Conclusion was that the nanny was an EMPLOYEE. Try it yourself.

Please, please, please be very careful.

Get something in writing from the tax office/inspector confirming that she is self-employed and you legally do not have to deduct tax, ni and pay employer's ni. There are large penalties for failing to account for this properly as well as the cost of having an accountant sort this out for you/negotiate with HMRC.

Please also be aware that there are insurance issues surrounding this. You need to check what the situation would be should she have an accident in your home - are you covered?

Finally, you need to ensure that you have a tight contract with her. YOu may not have to pay her holiday and sick pay if she is self-employed but what happens if she wants to vary her hours/take time off?

I see this all the time from a professional point of view and would say that it is best to get advice up front to avoid problems later on. As they say if it seems to good to be true (£8.50 gross rather than the usual net) then it probably is.

Hope it all works out

hello mommie

i recently faced this conundrum myself. this is the thread

the answer is basically it depends, but you would need to understand more about the situation before taking her statement at face value.

hth.

To be perfectly honest, mommie, I think the burden of being an employer pales in comparison to the childminder/nurssery pickup/dropoff and keeping up with the children's laundry.

There are lots of rules and regulations and responsibilites that can be a bit overwhelming as first. But once you learn to interview properly and select an appropriate candidate, write a good contract, then it's mostly snooth sailing.

I had a nanny I didn't get along with and it was very tense and just about drove me bonkers. Now I have one I love and I dread the day her visa runs out and she has to stop working for me.

Also, I want to clarify what the employers responsibilities are in terms of the nanny's taxes. You are legally obligated to deduct the taxes from her earnings and send them off to the IR. You are NOT legally obligated to pay them out of your own bank account. You do have employer taxes that you have to pay. But, there is no law requiring you to pay a nanny a net wage.

Also, I want to clarify what the employers responsibilities are in terms of the nanny's taxes. You are legally obligated to deduct the taxes from her earnings and send them off to the IR. You are NOT legally obligated to pay them out of your own bank account. You do have employer taxes that you have to pay. But, there is no law requiring you to pay a nanny a net wage.

It is worth noting about half way through the leaflet, that the self emlpoyment question have to be answered in respect of each job the person has. It says it is perfectly possible to be 'employed' in one job and 'self-employed' in other jobs you have at the same time.

Reading the self-employed and employed questions - there is no way a nanny on anything like usual terms could be deemed to be self employed!

As others have said, the forms take about 1/2 hour work every quarter and at the moment there is a £250 rebate for filing on the net!

re the bureaucracy - it's really not that bad - you pay an agency about £150-200 a year and you don;t have to do anything. they calculate all the tax, send you payslips, etc. And don;t be frightened off by maternity pay - it doesn't cost you ANYTHING (unless you are more generous that the state) In fact you make money out of it - they pay you a couple of hundred quid for the inconvenience.

Here is the IR guidance on self-employed vs employed!

IR56

BTW - if you do not pay NI and PAYE on behalf of your nanny (if she is deemed to be employed) then you will be liable not only for the back taxes but also to a hefty fine!

Nannies tha only work for a family for a short while - max 6 months i think CAN be self employed but the rest of us have to be employed. It used to be the case until about 3 years ago when they tightened the IR?? rules up that a nanny could be self-employed.

a waiver is only as good as the nanny's bank balance. The most you can get is an indemnity in the event that the IR come after you for unpaid taxes. It goes without saying if the nanny doesn't have the money to indemnify you with,the indemnity is worthless! You will be seriously out of pocket

Think the confusion comes from the fact that it was briefly possible for nannies to be self-employed but that loophole was closed in the budget last April I think with immediate effect (or the year before maybe??) As others have said, believe us, if there was a way to avoid paying tax and NI plus net wages out of income that is already net of tax and NI, we would know about it! If you decide to work it cash in hand, that is entirely your business of course - and if you can get nanny to sign a waiver that pays up if you get caught, so much the better.

crunchie it is a really grey area. She would need to have more than one other "client" family, as otherwise she is just an employee with two jobs, because it is the family who are dictating the terms of her hours etc. So a nanny who just does short term jobs would be fine as she has lots of different client over the year, but a nanny with two regular families over a long period of time wouldn't qualify to be self-employed.
Also, it is not enough to write into a contract that she is responsible for her NI & tax - if she is legally an employee, then the tax office will be after her employer for the unpaid tax - not her.

However look here too as it says they can't be!! a real complicated area.

BTW doing the tax retruns for a nanny is not that hard tbh, the Inland revenue allows to do simplified tax returns which are a simple form you fill in once a quarter. All you need do is set an hourly rate, then they will help you (tell you) how much you need pay each week/month for tax and NI. Once you know the weekly/monthly sum then you only need pay quarterly. It took DH about 1/2 hr once a quarter to do it.

I was under the impression a nanny could be self employed if you were not her only employer. Personally I would do what others have suggested and talk first to her, to ensure that you write up a contract that is very clear that SHE is responsible for her tax and NI. I would also then tell her you need to speak to the tax office to ensure it is OK.

Looking at Nannytax it does mention self emplyed nannies at the bottom nanny tax

NannyL has explained very well on the other thread about nanny Vs nursery why you cannot have a self-employed nanny. Also, it's all very well for the nanny to accept being paid in hand but where does that leave you/her if she becomes ill, pregnant etc and ends up with no entitlement to state benefits because she has paid no tax or NI? I think there are lots of parents who would happily not pay tax and NI for their nanny but it's illegal and just not worth the stress. I have a Hungarian nanny (not an au-pair) who I think would be happy being paid cash in hand but she is driving my children in my car on my insurance and I wonder to myself what position I would be in in if she had an accident and was found to be working illegally? I also don't need the pressure of wondering if IR are going to descend one day and demand access to my bank accounts etc to determine how I have been paying her.