are you exempt from tax and NI if nanny is self-employed?

[mommie]

i am about to employ a nanny two and a half days a week at £8.50 an hour. she says not to worry abour tax or NI because she is self-employed and will do all that herself. Is that right?

Also, I want to clarify what the employers responsibilities are in terms of the nanny's taxes. You are legally obligated to deduct the taxes from her earnings and send them off to the IR. You are NOT legally obligated to pay them out of your own bank account. You do have employer taxes that you have to pay. But, there is no law requiring you to pay a nanny a net wage.

Also, I want to clarify what the employers responsibilities are in terms of the nanny's taxes. You are legally obligated to deduct the taxes from her earnings and send them off to the IR. You are NOT legally obligated to pay them out of your own bank account. You do have employer taxes that you have to pay. But, there is no law requiring you to pay a nanny a net wage.

the bottom line is that with a nursery, you don't have any of this. i know there are loads of advantages to a nanny, but it is big commitment to become someone's employer, don't you think. going down the illegal road would be too fraught with worry for me.

To be perfectly honest, mommie, I think the burden of being an employer pales in comparison to the childminder/nurssery pickup/dropoff and keeping up with the children's laundry.

There are lots of rules and regulations and responsibilites that can be a bit overwhelming as first. But once you learn to interview properly and select an appropriate candidate, write a good contract, then it's mostly snooth sailing.

I had a nanny I didn't get along with and it was very tense and just about drove me bonkers. Now I have one I love and I dread the day her visa runs out and she has to stop working for me.

hello mommie

i recently faced this conundrum myself. this is the thread

the answer is basically it depends, but you would need to understand more about the situation before taking her statement at face value.

hth.

Please, please, please be very careful.

Get something in writing from the tax office/inspector confirming that she is self-employed and you legally do not have to deduct tax, ni and pay employer's ni. There are large penalties for failing to account for this properly as well as the cost of having an accountant sort this out for you/negotiate with HMRC.

Please also be aware that there are insurance issues surrounding this. You need to check what the situation would be should she have an accident in your home - are you covered?

Finally, you need to ensure that you have a tight contract with her. YOu may not have to pay her holiday and sick pay if she is self-employed but what happens if she wants to vary her hours/take time off?

I see this all the time from a professional point of view and would say that it is best to get advice up front to avoid problems later on. As they say if it seems to good to be true (£8.50 gross rather than the usual net) then it probably is.

Hope it all works out

thanks for messages - bossykate, i did look up yr thread and it does go into all this, so sorry for repeating old ground. i think we are going to go down the full time nursery route as we don't the responsibility of being employers. i take the point that nurseries are a hassle, but they take the weight off all of this. it is a great shame, as we liked this girl a lot but the gov just hammers you into the ground with red tape/costs and i think nannies are the preserve of the wealthy middle class - not us sadly

It would be nice if the Government made it easier for employers who only have one employee, but alas it probably can't be made any easier than it already is.

For those of you considering employing a part-time nanny (thus who would earn less than £700 a month) then you could use the Simplified PAYE Deduction Scheme details

With regard to Self Employment, HMRC have a new tool for helping decide if someone is Employed or Self-Employed: Employment Status Indicator Note: a Nanny is a Domestic Worker, in HMRC speak!

I have just been though the ESI putting in info as a parent seeking to have a nanny. Conclusion was that the nanny was an EMPLOYEE. Try it yourself.

Good news from HMRC. The new Employers CR-ROM has a P11 calculator, which works out Tax and NIC every time you pay your employee.

See the February 2006 Bulletin for details - online version - employers will be sent hardcopy plus the new CD-ROM.

mommie, i only pasted the link in case it was of some help, not to tell you off for covering old ground, honest!

i agree with you that nursery is much, much easier - or at least it has been for us.

Hmm - if you tell the ESI that you have a nanny 9rather than a domestic worker) and then answer the questions then you get a message that the employment status cannot be determined. Whilst many nanny contracts (esp full-time) will be contracts of employment it does not follow that all nannies are employees.

I am a temp nanny and maternity nanny and as such it is legal for me to be self employed.

A normal nanny is not able to be self employed.

If i work for more than a few months with one family then i am classed as employed by them.

Be Ware.

Re the one family that could be full time or part time hours.

I've not read all posts, so forgive me for repeating anything,

Nannies cannot be self-employed. Be warned. She probably wants to keep getting some sort of benefit or tax credit or another, so far as i am aware as a nanny for 13 yrs is that it is the employers responsibility to pay tax and ni, if you are found to not be doing so, i have no idea what the repercussions are. Look here for information:

www.nannytax.co.uk

It is the employers responsibility to extract the money from nanny's paycheque and send it off to the IR. So, if employer doesn't do this, I expect employer is in trouble. As for who actually owes the money if caught,I don't know. Wouldn't ever put myself in the position of finding out.