my nanny got her tax return

[CHILLTIME]

my nanny is with us full time and tax is payed on top of her agreed net wages.She just tolled us she got a
£600 cheque from HM rev people-we overpayed. Is that hers to keep?I dont know where we stand on this legaly?

Do you deduct tax and NI each month and make payments to HMRC? Do you have a tax code for her? Simplest thing is for her to check - gross income plus benefits less personal allowance = what should be taxed at 20% then 40% (look on HMRC website for guidance. If you have overpaid tax and she has received a refund it means that you have deducted too much from her wages. So it is hers.

Hang on tho - tax is paid on top of her agreed net wages. Do you mean tax and NI are deducted from her gross wages?

Hang on tho - tax is paid on top of her agreed net wages. Do you mean tax and NI are deducted from her gross wages?

Do you have net or gross in the contract?

contract states- net wages

Bugger.

That makes it tricky because you have unintentionally overpaid but presumably don't know why?

If gross was agreed in the contract (and I strongly advise you to change that figure ASAP to prevent it happening again) then there's no question that it wouldn't be nanny's, however if there is net agreed and no gross figure stated it makes it difficult.

Whilst obviously you deduct tax and NI on her behalf and she should benefit from any changes to her tax code she is getting £600 more than you agreed to pay her.

Do you do it through a payroll company? I would try and speak to them to be honest.

yes i think ill have to do that.

I would speak to whoever does the pay\tax etc.
But from an employees perspective, she did not have to tell you did she?
And would you give the money back to your boss if they made a mistake?

and it may not be tax paid in your employment.

Even if a Gross salary was specified in the contract, any overpayment would still be the nannies - as the employer is purely deducting Tax and Employees NI on the employees behalf. Only an overpayment of Employers NI would be returned to the Employer.

Whilst you have agreed a Net salary (nannynick bangs head against wall!) as far as HMRC are concerned you are still paying a Gross salary and then deducting Tax and NI payments - as that is how UK taxation works. So as far as HMRC are concerned, they pay back any overpayment of employee deductions to the employee directly.

I don't know why your nanny told you... if she had not done so, you would be none the wiser. Maybe she feels guilty, feels she owes you it. However, this overpayment may have occurred some time in the past, the paperwork HMRC have sent your nanny may indicate in which tax year the overpayment occurred. The overpayment could have happened in a previous employment.

I would suggest that you renegotiate salary at the earliest opportunity, so that it is clearly a Gross salary that is being paid, not Net. Then if an overpayment occurs again, it is definitely the nannies.

Thanx ladies thats great

How long have you employed the nanny for... several years? If she is willing to talk to you about it, then ask which taxation year it covers... were you their sole employer during that year. If you were, then you could then have a discussion with her about it being morally your money... but the refund cheque will be in her name, so you are relying on her feeling guilty and her deciding to give you some/all of it back. I don't know what the position would be then legally... I expect you would need to decide if the amount involved was worth taking it to a court.

If it were a underpayment and HMRC were wanting more money paid to them... would your nanny be expecting you to pay that? That way around, if HMRC claim back underpayment via taxcoding, then with a Net agreement it would be you paying that underpayment. Whereas if it were a Gross agreement, you would be deducting from their salary on HMRC behalf.

Maybe she will buy you a nice Christmas present with the extra money she suddenly has.

Changes in Personal Tax Allowance can be beneficial sometimes to a employer who has agreed a Net wage with their employee.
Independent: Increase in Personal Tax Allowance 2011 - the personal allowance increasing by £1000 will mean you would pay less Employee Income Tax, if still on a Net wage agreement.

There are pros and cons to Net pay agreements. You need to consider if you can withstand the cons.

Am I wrong in thinking that this is something your payroll company SHOULD have been more on top of? If she hadn't changed jobs, that is, in the year the refund is owed her?

I can't get my head round why she doesn't owe you the money BECAUSE she being paid net. She's already had the net amount you committed to paying her, the tax back should be yours. Because YOU would be liabile if the tax regime went against you having agreed the net amount, you should also benefit I should think from any refunds for tax you've paid on her behalf. Fully accept I may be wrong by the letter of the law but it doesnt' feel right to me.

I agree with Harriet. I think as a net salary was agreed the refund should be yours. But, I also agree that your payroll company (assuming you have one) has some explaining to do.

Incidentally, I am not a lawyer so you should perhaps take the advice of someone who is.

ive decided to let her keep it and not mention it. 1 its partialy us partialy another family so that side and 2. we do not pay tax on all of her wages so the money we would have payed is much much more than this slight overpayement Its only fair weve already made a huge saving and shes a kick ass nanny ive had feed back so everybody happy in the end

"kick ass"???

Are you American?

we do not pay tax on all of her wages

That's more interesting that them possibly being American surely? Is someone on Mumsnet really admitting to under declaring a nannies salary.

just reading this thread back- you're not actually the nanny are you?

Wondered if any under/over payment refund be mentioned in anything sent to employer i.e. saying 'last years gross salary was such and such' 'tax was such and such'. This would show in writing that percentage paid was too high and could claim it back from payroll agency, who could chase nanny? (how's your head nannynick?)

What if employers overpaid by 100% of salary or underpaid/didn't pay? surely agreeing net means it belongs to employer(s) and not (enough) tax paid is their liability?

Perhaps nanny should pay this £600 to HMRC if tax was underpaid.

Add message | Report | Message poster nannynick Tue 23-Nov-10 17:48:12

we do not pay tax on all of her wages

That's more interesting that them possibly being American surely? Is someone on Mumsnet really admitting to under declaring a nannies salary.

That went through my mind to, nick.

Even if you do it, and many people do despite the fact it's illegal and carries financial penalties in addition to backpayments, it might not be the wisest thing to admit on a public forum...

you are admiting you dont pay her tax??

and yes it may be tax from a previous job

nanny is keeping her lovely cheque of over payed tax so yes tax is being payed to worried nannies out there. 8ut deff babbysitting and extra hours often add up to more than specified in her contract so yes she does make more off the books as well. When a family looks for a good nanny and finaly finds her-it is then her choice

to start working for this family considering all aspects of that employment inccluding extra hours and babbysitting in adition to her wages.Thank you for all the frendly input.ct

Ps.Just spoke to a nanny agency and they confirmed that babysitting and extra hours do not need to be specified in the contract and becouse of its unpredictable nature usualy isnt taxable eather so no after allas we

after all we havent made any savings on the tax part-but reading all the pissed off coments really wish we did(grin)