Nanny tax question

[Sticklebug]

My nanny has rung me today (she works Wed-Fri) to say that she has had a letter from the tax office saying that her tax code has changed and that she can now earn £990 before paying tax, instead of the £877 she can currently earn. She has assumed that this means that her monthly pay increases by £113 a month.

I have explained that as I pay her tax, this is not the case. I have tried to contact the nanny tax agency we use, but they are not answering the phone. Our nanny has got very upset (she has been with us for 11 years and we have a very good relationship) and says she cannot understand why her pay will not go up as a result of this tax change as it did when her DP's tax code changed.

If this means that I have to pay £113 less tax a month (which I am not sure that it does), then I would be willing to give her half of this - does this seem fair?

If you have gross in her/your contract then yes she does earn more take home (the end amount stays the same ) but if net then she gets the same as before and you pay her more before you have to start paying tax on it. This is a reason why gross should be agreed and in the contract.

The annual amount you can earn before tax has changed again this tax year but not by that much per month. Think it works out at about an extra £50 take home if gross is agreed.

It really all comes down to what her contract says. It is says her wage is net, then that stays the same. If her wage is listed in her contract as gross, her after tax pay will increase

An extra 113 a month tax free, doesn't mean you take home and extra 113! It just means you don't pay tax on that bit, which will be at 20%

20% of £113 = £22.60

I've not dealt with tax from the employers side before, but I would assume that you will be paying 22.60 less in tax a month, and that will go to her.

• an extra, not and extra

Thanks for the responses. Her pay has always been net and I use a nanny tax agency to tell me how much tax to pay. I will give her the extra £22.60.

Maybe re-draft the contract to include a gross figure to avoid future problems.

Suggest she and you agree a Gross pay contract for the future, so taxcode changes do not affect YOUR costs and she gets benefit of a rise in personal tax allowance.

As employer you or your payroll co may get notification of taxcode change and have to apply that for the next payroll run.

I'm baffled. She's being paid at an agreed net rate, which means she is shielded from her income dropping if tax or NI goes up, because the employer would have to bear that cost. How can she complain when tax goes down (unless you were the one who insisted on a net agreement?) and why on earth should you now pay her extra?

And this is why all salaries should be in gross - tho not much help now

Many nannies dont understand nett and gross and how salarys go up and down - and many agencies don't help either by stating jobs in nett

She does not understand at all. I use a nanny agency and have sent them the letter she has received. What is odd is that this is the first contact she has had from the tax office - normally goes to me. It is less than £20, so will increase her pay by that much a month