how do we sort out tax for a nanny who already works for another family?

[levantine]

We need to pay tax for a nanny who does half the week for another family. So she will have a tax code, but to complicate matters, her other job is a nannyshare so her tax code is apparently split already

What do we need to do? ( I understand that her tax allowance will already be used up. )

Just make sure you have agreed a gross wage with her as she will pay more tax on the wage from the job with you.

Hmm. We have just agreed £9 net. She thinks she may be able to do it self employed? She says another family who have employed her for the odd day here and there just produced some sort of form or other for her to sign and then they were able to pay her tax

The nannyshare they are already doing is probably done as one employment, so that employment would be using the personal tax allowance.

Assuming in that job the nanny earns more than their personal tax allowance, then the full allowance gets used up in that job meaning that any amount you pay them will be fully taxed.

You as the employer need to operate PAYE, assuming this is a regular commitment job such as you needing the nanny to work certain days each week. Is that the case, or are you only needing ad-hoc care for which the nanny offers you no commitment to be able to do the hours you require?

If it's not too late, then negotiate a Gross wage. Net can be tricky as you don't know for sure what the taxcode will be until HMRC tells you what to use. As the nanny has another job in which you feel they will be earning above their personal tax allowance, then I would suggest you presume that the their tax code for your job will be BR. You can then use a PAYE Calculator to establish what your costs are likely to be.

If you are say hiring the nanny for 16 hours (split over 2 days) a week at £9 net and it's at BR code and the nanny does not have a student loan, then using the PAYE calculator I get £11.71 per hour Gross. Employers NI £372 per year.

Note: rates change, often around April time so things like Employers NI could well be more come April 2012.

Okay. It is a day a week - 8 - 6, will only be til March or so.

This is going to sound really thick, but how do I actually go about paying the tax?

Thank you btw

On a slight diversion, how do nannies manage to get paid net??

And more importantly, any tips on how to convince an employer to pay a net salary? I got royally stuffed by the changes to the personal allowance :(

So it's employed status then in my view. If your nanny wishes to do it as anything different they need to talk to a status officer at HMRC. To protect yourself, do it as PAYE unless told differently by HMRC in writing.

For how to operate PAYE see HMRC: PAYE Intro

You can use a nanny payroll company to do the payroll for you. Some of those companies will do you a special package for short term employment, though they will have a cut off date... so if the job is starting now (Nov 11) and finishing Mar 12, then that may well be over the period they will do a reduced rate for. PayeForNannies for example has a reduced rate for doing payroll of up to 3 months in length, otherwise it's the same as an annual subscription. The payroll company will generate the P45 (at end of employment) and P60 form (at end of tax year).
You could do things yourself, see P49 (pdf) for a work through of doing a payroll run.

You physically pay HMRC every quarter (dates determined by HMRC not by you) - see here for the various forms of payment they accept.

As it's only one day, 8-6 at £9 Net (so I make that £11.25 gross) you will be not be paying enough to trigger Employers NI.

I am wondering if MrAnchovy is around... he may have suggestions as to if it's worth using a payroll company in this situation or if the basic tools provided by HMRC would be sufficient. He will also probably point out anything I've got wrong

malinois - don't get us started on that one.

Nannies are not usually paid Net these days... my contact certainly has Gross written in it and there are other nannies who post on Mumsnet who have a Gross salary stated in their contract.

It is rarely in my view in the employers interest to agree to a Net salary, as the employer can get royally stuffed if the nanny has a student loan, or anything else that may be recovered via taxcode such as past years worth of underpayment of tax/ni. Also employers don't know what the employees taxcode will be until they are told, so parents can't calculate what it will cost them - a nanny could have 747L as a taxcode but they could have anything and it can change during their employment.

Not sure how you got stuffed when personal allowance changed... if you are a nanny on a Gross contract, then when personal allowance went up, you had less tax deducted from your wage. If you had a Net pay agreement, your pay would have stayed the same and your employer would have benefited from the change in personal allowance (so if you were on Net, you got royally stuffed as you say). See sometimes there is a benefit to the employer agreeing a Net wage - but I would suggest that anyone agrees Net.

malinois - have you got net and gross the wrong way round? Net is how much you earn after you have paid tax and ni and gross is your wage before tax and ni are taken off. When the personal allowance changed in April it was nanny's being paid net that dipped out. The personal allowance increased by £1,000 so you only got the benefit of that if you were being paid a gross wage.

Slow typing again

nannynick I'm not a nanny :) I work for a technology consultancy and lost my personal allowance this year as the new tax rules mean you don't get an allowance any more over a certain amount. If I had been paid net (no chance!) it wouldn't have been an issue but as it was, £7k straight out of my pocket :(

I wasnt being entirely serious as I couldn't believe any sane employer would agree a net salary!

Thank you so much for taking the time to post all that - much appreciated. It is a real minefield isn't it

£7k straight out of my pocket Was it not 20% of £7k that you lost?

• disclaimer - nbee84 is no mathematician!

Levantine - with luck MrAnchovy may spot this and give you some suggestions. If not, then I would say call a nanny payroll company and get them to sort it out for you... it costs around £120 a year (less if the job lasts less than 3 months). Is that an admin cost you would be prepared to pay to have someone else cope with the minefield and produce the payslips for you and tell you when to pay HMRC and how much to pay?

malinious - do you earn a lot then? Is it something to do with the tax brackets? I'm not sufficiently knowledgeable about it to work out why you lost 7K.

Nbee. Nope, my personal allowance was 7k(-ish). Now it's zero. My gross income has not increased at all (actually gone down a bit)

nick reasonable amount but I think the moral is, of you're an employer make sure you pay gross, if you're an employee make sure you're paid net

Oh, malinois - your income is over £100,000... That's my guess. See Adjusted Net Income.