Nannies and tax

I thought everyone paid tax... but I have had 3 nannies and 1 mother's help in my time, and I have had to get two of them to get NI numbers when they started working for me so I could pay their tax. All previously "employed" in the UK.

Some agencies will put nanny shares together, and their fees will reflect that . You don't say how old your DC is - how would you feel about sharing a nanny with someone whose kids are at school? My cousin did this with her first child. We nannyshared with some NCT friends before DS2 was born, and both children were the same age.

where are you locaated nesomja?I know that cms without gardens bring the kids outside a lot...etc... but I personally wouldn't like it if they didn't have a garden either and wouldn't send my child to a home with no garden for daily childcare. Keep looking though - you may find a nice cm nearby. You could also try a nursery....

Likewise, everyone i know pays tax but maybe it's skewed by the part of town I am in (SW London) or that most folk I know who employ nannies are colleagues and we'd be front page of the FT if we didn't and got found out. Anyway, I had no idea it was so common.

Seems odd to me folk would take the risk. It's illegal at the end of the day plus it really shows no respect for your employee.

I'm surprised to hear there seem to be so many cash in hand nannies out there. Everyone I know pays tax. (or they are pretending, by complaining about it!)

Don't forget you can use vouchers (at least for a few years yet) for nannies who are Ofsted registered.

I too find I am in the RL minority when it comes to legal employment (including but not limited to tax) of my nanny. I ws out with some other mums before the election. We were debating politics, and one mum commented that she thought child benefit should be cut for anyone earning over £50k because they don't really need it so should give it to someone who does.

BUT....

I happen to know through a very reliable grapevine that this mum pays her nanny cash in hand. So, I was sitting there thinking "Hmmm... perhpas you should pay tax then??" I didn't say anything and she doesn't know I know about her CIH arrangement. But it of course worth knowing that nannies talk and if you pay her CIH it is probably common knowledge around the school gate nanny circle.

The kind of nanny who is happy to be paid cash in hand is likely to be a student or in the country temporarily or claiming benefits or maybe not working legally - so unlikely to be worried about maternity pay or a mortgage.

ok then. I thought you meant nanny gets paid in cash and she doesn't declare it (in which case she cant get mortgage). If SE, i agree no problem.

If you are self-employed you can still get a mortgage. And you might be paid more, so I can see why from that perspective a nanny might want to be self employed. Plus there's no risk to the nanny; it's the employer who gets a spanking for not operating PAYE.

I still dont get why a nanny would be happy with it thu. Apart from maternity leave and pension, what about getting a mortgage?

I agree with you Nick - I would never take a job where my tax and NI wasn't dealt with, but still I have met a lot of nannies who claim to be self-employed, many of whom tell me they self-assess with HMRC. I guess if you are not planning on staying in the UK forever building up an NI record for a pension that will be worth, at most, a tin of beans a week by the time they retire just isn't terribly important.

I think some nannies don't pay their wages into the bank. I paid my last nanny in cash a couple of times (as she didn't want to wait for the money to clear, we still paid tax etc) and she asked me whether it was ok to pay it into her account. Apparently she'd not paid her wages in with previous employers.

It isn't right, of course, but it is not as if HMRC are going to track down every nanny employer who does this and fine them. In fact, I'd like to know how many they do catch a year. I am sure they have way bigger fish to fry.

What about the nannies though, if they are not being paid correctly then they won't get NI stamp paid and won't have tax payments showing on their tax record - would HMRC not get suspicious if someone didn't have any earnings, didn't claim benefits, yet had money going into their bank account?

Indeed Micky. And legal bosses are going to be more constrained soon (pensions changes from 2012 increasing employment costs) so there will probably be even more incentive to keep nannies off your books.

As far as I can see the only benefit of employing a nanny legally (apart from the security of knowing you won't get bitten by the Revenue) is that you can reclaim SMP/SSP etc. Although given the amount you might save by not operating payroll this might be a small price to pay.

many employers don't pay the tax & NI because they feel that childcare costs should be tax deductible. at least that's how they justify it in their minds.

My nanny was happy to be legally employed until recently when she found out that even if she lost her job she can't claim unemployment benefit because of her husband's earnings. So she's thinking, why did I bother to pay all that tax, i would have been 25% better off if MB didn't insist on a legal arrangement... can't win, can you?

The problem is if she is happy to be paid in cash she might ...be on benefits. Are you willing to risk this? If someone makes a phone call to benefit fraud line you will have them knocking your door.

Nanny share or nanny with her own child?

i'd try for a nanny share, which is what we've done. It makes it more affordable and not too much more than nursery. Some people pay part taxed and part cash but we ultimately didn't feel comfortable with that. You have to consider you professional position too - some jobs have grounds to sack you over such matters if you are found out.

For the record, we pay £10net for a SE London nanny share, split 55%-45% between the families. My three-day out of pocket cost comes to around £210.

As a nanny I've never been paid £11 per hour take home.
In one job a few years back, I was on £7.31 an hour Gross. These days its a little over £10 gross.
I'm about 25 miles from London. So perhaps it's just that London nanny rates are too high?

If you only have 1 child and don't want a childminder due to school runs or lack of garden space (my reasons in London) honestly I would recommend a nursery.

We have been so happy with DS's nursery and when DD came along we tried to recruit a nanny but decided against it because:

• at a nursery the same carer doesn't have to do the cooking and clearing up
• our home is not as baby safe as a nursery
• nappies and food are included
• you don't have to worry about nanny sick days and holidays and being late to work
• they have proper insurance

We would have gone to the extra expense of a nanny inc. NIC, insurance etc if a nanny had solved all our problems but we felt it actually wouldn't and I personally felt I would have been a very demanding MB, expecting nursery-style schedule and records (which most interviewees didn't seem that keen on).

Mind you, we are very lucky to have had grandmother cover when DS had conjunctivitis for 2 weeks.

Star - it wasn't the tax that was the killer, it was the £11ph take home that I couldn't stomach. Would leave me with about £300 per month to commute on and eat!

I think that a lot of the cash arrangements are skewing people's perception of nanny pay. The vast majority of the nannies I meet who are on £9+ ph net are not paid legally (or get some of their pay taxed but not all). So when one wants £9 or £10 ph net and to be paid legally suddenly they are asking a lot (essentially, for the mother to be earning in excess of £60k pa and to not mind working just for the sake of it).

Yes, however if nannies start agreeing gross wages, they will price themselves right out of most people's markets (as Haliborange's nanny did to hers).
People will keep doing it illegally because some parents can't afford to pay what a nanny expects in net along with tax/NI and the supply/demand of nanny jobs....etc.

Yes, whatever you do agree a gross wage. It will probably be in the nanny's interest too if the tax-free allowance is increased.

Agreed Nesomja- when I was advertising recently my former nanny was the only applicant who expected to be legally employed, and she has priced herself out of my market.

Basically I am considering changing jobs, going ft again, doing all the hours I can, just to have some cash over after paying the nanny! Lunacy.

Frakkit - thanks. I couldn't square the housekeeper thing with the Revenue rules. Sounded like bolleaux, but you never know!

Not if you agree a gross wage. Nannying's a bit odd as things are still talked about in net, but that's changing. Most people have a gross hourly/weekly figure in their contracts now, and I know a few people who have a gross annual salary.