Why in 2016 are parents still wanting to pay nannies in cash

How is employing a nanny a "private arrangement"? And what does that mean?

I simply mean that it's an arrangement between individuals/families rather than a company employee.

Funny, I thought people went to work because they can't afford to stay home. Childcare is absolute requirement. Staying home is a luxury for those who can afford it Not always the case. I gave up full time work for a number of years, because with three children, the childcare costs were greater than my take home wage. It wasn't financially viable to work away from home.

How is employing a nanny a "private arrangement"? And what does that mean?

Regarding Yarazig's comment "But like many hundreds of thousands of people you stay at home if you can't afford to pay out for childcare". Funny, I thought people went to work because they can't afford to stay home. Childcare is absolute requirement. Staying home is a luxury for those who can afford it. If staying home is the default position, then those going to work have to fund that choice. And they have to pay for childcare.

I absolutely agree with others on this thread that income used to pay for childcare should be paid out before tax is calculated. If I say made £2900 per month and paid a nanny/childminder/nursery/club £1800 per month, then I should be taxed as if I made £1100 per month. So I would be taxed on an annual income of £13, 200, the nanny would be taxed on an income of £21, 600. Under the current system, the government takes taxes from me on an income of £34, 800. And then takes them again from the nanny on £21, 800.

I have been arguing this point for many years. It is unlikely to happen.

cindy34 what about the right of families to work with reasonable cost childcare? The disconnect between wages and the cost of childcare is huge. Making it all tax deductible would make a huge difference. You could cap it at a number of children if necessary.

How many people have paid for nursery care out of their non-taxed income? Workplace nurseries were an idea some years back but they did not happen in a big way. Maybe whatever limits there were on it were too restrictive. Childcare vouchers is what has remained from those days, as it is more practical but even that will be phased out soon. The new system may or may not be better.

With nannies, isn't it more about employer responsibilities? Parents may not want to be the employer, they would rather use a service... yet don't want to use a childminder or nursery.

Nannies are predominately women, often quite young, so measures in place are designed to protect them, provide them with employment rights, now encourage them to save for a pension. Shouldn't we be encouraging women's rights? Does a nanny not have as much right to have the same benefits as other workers? Or are nannies still seen as servants?

Should that also be paid out of non-taxed income?

That would be nice [yearns for housekeeper and gardener]

As a parent [obv] I would view a cleaner/housekeeper/gardener etc as more of a lifestyle choice.

Certainly one could take the view that having children is also a choice, but it is one that the government encourage and support [ish] needing a supply of young people to enter the workplace, pay taxes and thus our pensions/care costs in our old age. There is also a stated strategy to ensure that both parents enter the workplace as soon as possible and tax policies which do not support a SAHP situation. So I would argue that our successive governments view children as a necessary evil rather than a lifestyle choice.

Why do you think that the situation not like a company employee out of interest?

I'm just responding to this comment made by a PP

No-one else pays their employee out of taxed income - tax is calculated after you pay your employees for any company

A nanny is a private arrangement, not a company employee in the usual sense. I agree a nanny is an employee with all the extras that an employer has to provide. But as long as childcare is not tax-deductable, it's really as different situation. It's more comparable with, say, employing a full time housekeeper or gardener. Should that also be paid out of non-taxed income?

We also found the opposite - one nanny wanted me to put 24 hours a week at Nmw through payroll and the rest in cash so she could claim tax credits and housing benefit!

Why do you think that the situation not like a company employee out of interest?

The employing family have to provide payroll, holiday pay, SSP, Mat leave, comply with most workplace legislation, observe standard industry disciplinary processes etc etc. Your employer has to insure you and their home appropriately etc etc
As a nanny you will usually be an employee of 1 but to all intents and purposes you are an employee like any other?

budgiegirl Nannies are not allowed to sort out their own tax and NI. I understand that. Like I said, it's to protect the nanny. I'm just trying to make the point that a nanny is not a company employee.

Yes. Work related expenses should be 100% tax deductible. How does anything else make sense in getting people back to work?. I agree , for all forms of childcare, not just nannies.

Yes. Work related expenses should be 100% tax deductible. How does anything else make sense in getting people back to work?

budgiegirl Nannies are not allowed to sort out their own tax and NI. The employing family have to do this unless the nanny can prove to HMRC that they are self employed which appears to be working 3+ different jobs.

But budgiegirl a nanny is an employee and the only type of employee who has to be paid out of taxed income

Well, yes, I understand that of course, but the situation is not the same as a company employee. It is a private arrangement, and therefore should be paid for out of taxable income. The fact that a nanny has to be an employee is really just a technicality to give stability to the nanny as she can only work for one family (or possibly two) at a time.

If a nanny were to be paid out of non-taxed income, then surely it would only be fair to allow other families to be pay their childcare costs to child minders, nurseries etc from non-taxed income? Not a bad idea maybe! But not the situation as it stands at the moment (with the exception of a small tax break for some from child care vouchers)

But budgiegirl a nanny is an employee and the only type of employee who has to be paid out of taxed income.

No-one else pays their employee out of taxed income - tax is calculated after you pay your employees for any company

But employing a nanny is a private arrangement , a nanny is not employed by a company. Financially, it's no different if you pay your nanny gross, and she sorts out her own tax and NI (as you would with a childminder, gardener, cleaner etc), or whether you pay her net, and you pay her tax and NI directly to HMRC. The cost is (or at least should be, if done legitimately) the same.

I can see though, how the system is open to abuse, and also how it can be confusing when many nannies quote their expected wage as net.

I am currently searching for a nanny and have been surprised by the number I have interviewed who are being part partly in cash by their current employers.

We have always done things properly and have reported all income, paying the net amount to the nanny and the tax and NI to HMRC. I feel strongly that every employee is entitled to this method of payment, as it is important for getting a mortgage, access to statutory maternity pay etc.

We are lucky to be able to afford this, we make sacrifices but I do appreciate that many could not afford it even with sacrifices. HOWEVER, in my experience, a lot of the families who are paying cash could afford to operate correctly and it is a choice to save money rather than a necessity.

It also makes it more difficult to pay a competitive salary, because it costs us a lot more to do it properly than it costs someone to pay cash the nanny - therefore we can't always match the net salary.

It's also illegal, but I suspect that HMRC are too incompetent to ever catch up with many of the employers paying cash.

Parents offer and do cih as some nannies accept it

I know 2 who do it. Bugs the bloody life out of me. Even more so that one claims benifits as well !!!!!

Disgussing gross helps as then the employer knows what the nanny will cost them a week

Ie 30hrs @£13 gross so £390 plus employers ni

Or 50hrs @£11 gross so £550 plus ni

I do think it's unfair that those who use professionals as childcare have to pay their salary out of their nett wage

Should be taken out of their gross wage and then taxed on the remainder

And abolish employers ni

What does it do? Where do it go?

We do it legit and offer a proper contract and pay tax and NI. Our previous nanny loved it, first time she had ever been paid like this in nearly 10yrs and she had never had paid leave before or been 'registered' for NI. When she left we offered the job and the nanny found it all too restrictive didn't think she was getting a good deal.

We found the opposite. We insisted on paying tax and NI, and our nanny was upset about it as her previous employer had paid her cash in hand, so she felt she was getting a poor deal.

Very common round here. Pisses me off as all the people that do it this way are richer than us (and we do it properly to be clear..!).

it is hugely expensive to have a nanny - except if you have three children and then its the cheaper option!

All good points made above - the other thing is that the govt can't decide if nanny employers are employers or not

We get all the responsibility of being an employer, but none of the benefits. No-one else pays their employee out of taxed income - tax is calculated after you pay your employees for any company. Also, small businesses get an NI exemption which is specifically denied to nanny employers. The loss of reimbursement for SSP was the thing that made me finally decide to cut down on work hours as I ( a well-paid GP with over 10 years experience) was taking home about 2/3 of what I was paying my nanny.

A full time nanny will take the first 70-80,000 of their employer's income, you only start to take any money home after that, so it really is the refuge of the very wealthy these days.

I think there are a few issues here:

• the vast majority of nannies I know only discuss in net terms, they actually don't want to talk in gross as they like the certainty of a net agreement (at whatever cost to the employer)
• tax relief for childcare is ridiculously low, and of course, those childcare vouchers must be paid to an OFSTED registered provider, which some nannies are reluctant to become.
• agencies work as an "introduction service", and while there are some who help greatly, others have no idea how taxation works, or the implications of perpetuating these net agreements.
• parents aren't aware. Cleaners can be paid in cash (domestic workers), so why not nannies? I am aware that nannies are not cleaners but was trying to illustrate a point about thought processes.
• nannies don't know what to ask for, and parents aren't sure what they need to do to formally employ someone
• nannies are taken advantage of because they don't know what they should be asking for, which can sometimes lead to parents sweep legality under the carpet
• their last nanny took cash, and they are comfortable with this arrangement.

It is a minefield, however I think if more nannies quoted gross and refused to work for parents who were not prepared to pay legally then we would see a drop in the prevalence of this attitude. Unfortunately, for every nanny who wants to be paid properly, there is another nanny happy to be paid under the table.

Because almost no other type of employer is expected to pay salaries, pension and tax out if their taxed income. I run a company and all our staff costs are paid from untaxed revenue. Only for my nanny am I expected to pay tax out of taxes income

Childcare is a huge cost - no arguments there. Even Government seem to be appreciating that a bit more by offering to pay towards it, in various forms, though as always it is subject to eligibility.

Parents do not pay the nannies income tax, they deduct it on the nannies behalf (and should save it in a an account) and pay it to HMRC once every three months - in the same way their employer does for them, if they are an employee.

Employers NI is the big tax that is 'hidden' but nanny agencies and payroll companies should be talking to parents about that and they may even provide a projected statement for how much that is likely to cost, on a monthly or yearly basis based on the current financial year.

So is the problem a lack of information? Is the problem anything to do with Net wages still be advertised/requested?