Gross salary in contract

[Maisieskates]

Ok so I'm just about to employ a nanny for the first time and feel very out if my depth with the whole net vs gross salary thing. I understanf vaguely why its of benefit to me to agree a gross salary but am not sure of the advantages/ disadvantages to the nanny. Can anyone explain in case i get into the discussion? My plan was to stick the net rate she's requested plus tax code 747L into MrA calculator and show her the resulting gross £ as backup to the gross rate I'm proposing. She'll be doing 3 days a week for me - not sure if she has or plans to get a second job.

How are you planning to account for NI contributions?
Use the calculator in the HMRC website. Also dont assume that's the correct tax code you will need her P45 or she will have to complete a P46.
Alternatively take her on on a self employed basis then you don't have to worry about any of it.

Nanny doesn't wish to be self employed - presumably thats lots of paperwork, admin and cost to her?
Was planning to use nannytax or similar to do payslips. MrA calculator gives NI figures.
Will cross check these with HMRC calculator.

Maybe some tax advantages to her being SE has she researched?

Nanny should not be self employed. Look at government guidelines re self employment and you'll see why, cannot link, on phone. The employer is the one who will get screwed if she's discovered by the tax man to be self employed as a nanny in a situation that doesn't call for it though (it's rare that they can be). Advantage to gross is that if personal allowance goes up, her net wage does.
I have two jobs, one I get personal allowance from, the other takes twenty percent out of my wage. Saves splitting tax codes and I still get the same amount take home at the end of the day, though if toot nanny wants another job she may split tax codes. Have you spoken to nanny tax? They may be able to help.

If you employ a nanny you can't "make them self employed" it isn't a decision but a statement of fact based on the hmrc criteria. Even if you agree between you that she will be self employed if the facts don't match you will be liable to pay her tax and NIC so if she doesn't you could end up with a massive liability.
Is this the nanny's only job? If not the her personal allowance will be applied to the primary job and she will pay 20% tax on all the earnings from the second job. If you agree a net wage with her on the second job the amount of tax you would end up paying to top it up to gross would be considerably more and you would be out of pocket. You will need to calculate all the deductions she will see (PAYE and NIC) plus employers NIC to work out what it will cost to employ her for the net wage she wants.

Also count student loans in her deductions if she has them, I'm pretty sure they take it from your wage right?

One advantage this coming year for the nanny to agree a Gross wage is that in April the personal tax allowance goes UP. They therefore gain more in take home pay if they agree to a Gross salary.

So if you agreed to pay £300 Gross per week (assuming 747L taxcode) that is currently £249 Net per week.

If you agreed to pay £249 Net per week, come April 2012, the Gross pay is £295 (assumed taxcode of 810L).

Whereas if you agree a Gross of £300 per week, then come April 2012, Net pay (taxcode 810L) is £253.

Ok so £4 per week rise may not sound that much but it's a couple of hundred pounds over a year.

Don't agree net, whatever you do. Always always gross (see nannynicks posts for more info).
A gross salary protects YOU, not the nanny. If you agree net, you are effectively agreeing her/his take home pay, no matter what deductions need to come out. So if her personal tax allowance goes down, for example... Say she/he didnt pay enough last year...it's YOU who has to pay the extra, not the nanny.

ohdearwhatcanidonow nannies cant be self employed

a gross wage protects you as an employer if your nanny decides to get a 2nd job