Calculating tax for nanny with 2 jobs.

[OuchyMcOuch]

We're just working out what the total we'll be paying our nanny will be. She will work part time for us, and part time for another family (15 hrs a week with us, 15 hrs a week with the other family). Both jobs will pay below the threshold for tax, but together they will pay above the threshold.

Who is responsible for working out the tax? Dh says it would be up to the nanny to complete a self assessment, as it's unfair that we have to pay her tax as the pay we give her is below the threshold for tax. However, I'm sure I've read loads on here about families having to split the tax free allowance. Who's right?

I do payroll for a limited company where i am employed plus I also run my own business as a partnership employing a couple if students who each work 4 hours a week so I have experience of both situations.

However I am not a qualified accountant/tax advisor etc.

But the amount of pay is not under the level, it looks to be over to me.

12net could easily be over 15 gross. Even if it were 12 gross an hour, that would still be over the lower earnings limit wouldn't it?

Thanks for that pictures... That's all really useful stuff.

cindy I will use that basis to try and work out a decent gross rate.

outraged I could offer her £9,000 pa gross, but if she's after a rate of £12 ph net, she would probably expect a bit more than that. But I will offer her a gross salary and say we won't discuss in terms of net as it's too confusing. For everyone!

Ouchy, talk to a nanny payroll company. They will be used to doing net wage agreements so will know what is and is not possible. You are talking quite big numbers, not near national minimum wage.

How much would you pay someone to do the job? Is 15 to 16 an hour something you would pay? Or were you looking more at 12?
You decide what to pay, whilst a nanny may want 12 take home, it isn't going to happen if you are not prepared to pay 15+ gross.

Just reading an item in the Times Money section today about the scheme to replace the childcare voucher scheme next year... Referring to nannies and nanny shares specifically the last paragraphs reads "make sure you budget for paying their tax and NI".... Things like that just perpetuate the net pay culture! Grrrrr!

£12 per hour gross x 15 hours per week is an annual salary if £9,360 which is under the tax level. Furthermore evenif it were to rise to say £10,500 the OP would only have to deduct tax on the extra £500, not the whole amount as she will have to do now.

The level for deducting National Insurance however is £111 per week so actually c

Contrary to what I said before the other nanny employer will have to register for PAYE to deduct that.

nannytax.co.uk have a net to gross calculator on their website somewhere

To be honest, I'm not sure we'd really be able to afford to go up to £15ph. It's for an after school nanny, picking up from school at 3 or 4pm depending on clubs etc, taking home, giving tea and bath, sitting down and doing ten minutes of reading with them and the putting at least the youngest to bed. I know the expectation is that after school nannies command a slightly higher rate of pay due to the restricted hours, but I'm not sure it should be that much more. Should it?

Well in a sense it's right in that there are two types of NI payments. Employee contributions which is deducted from her pay & employer contributions which you pay on top.

This us why I don't like RTI.

On the old manual system we had tax & NI tables so I could see exactly where thresholds kick in & how the scale rises.

Now we input the figures into the computer & it calculates the deductions for you.

After school nannies do get paid a lot but that does sound quite high, are you in London?

Cindy, we're not, but we might as well be - SE Surrey.

Costly area. Alas finding someone to do short hours is not easy. Could you offer them 13 gross (or what you can afford, remembering that there will be employers NI to pay) and see if they accept? If not, any other applicants?

Yes, I know Cindy. We're in an area where there are some very rich people but we're far from rich :( The hours fit in perfectly with her degree so I'm hoping that she'll see it as the ideal job and accept what we can afford.

I live in the same area as you se Surrey and am an after school and holiday nanny. I get £9 net a hour and am very happy to be getting that, I do think she is asking for a lot even for a part time job £10 a hour net would be more the norm I would think. So about £12.50 a hour gross.

12net sounds high. 12-13 gross more realistic.
Maybe she thinks at 12 an hour there is no tax but that is not the case, especially when more than one job is involved.

See how much free advice you can get from payroll companies. They should give some in the hope that you use their service.

nannynick and eeyore… thanks so much. I am going to see what HMRC say to us about her tax situation with regards to her other job. I also need to clear up with her whether that job is going to continue for much longer, because I seem to remember her saying her degree course days will be the days she currently works for the other family, so if she gives that up, and her earnings are just what she gets from us then I'm happy to pay her @12ph net as it'll be the same as @12ph gross (she'll still be just below the threshold at @9,350)

Apols for my lack of pound sign… can't find it on this bloody mac keyboard

Even if that does happen and you are happy paying her the £12 net make sure it is written as gross in the contract so of she does get other work it won't affect what you end up paying in total.

12ph net and 12ph gross will not be the same. Firstly, because although she's under the tax threshold, the NI threshold is lower and she will be above that. Secondly, how are you going to contract it? Are you going to say 12ph gross? In which case it won't be 12ph net, it will be 12ph gross. Or 12ph net, in which case it will be 13+ gross.

It just doesn't work. Don't worry about her net wage. Don't worry about her tax code/whether she has another job/student loan etc etc. Just agree a gross wage that you can afford.

P.S. You know that any student loan she has will effect her net wage? You'll end up paying that too if you're not careful.

Oooh outraged, I didn't think that about the student loan. Thanks for that.

We've offered her a gross salary so hopefully we'll avoid all of the pitfalls of net salaries. I just hope she accepts it, she's really lovely!

Hope she accepts. Certainly do try to avoid the pitfalls of Net wage agreements.

Hi nannynick… she seems to be disputing how we've grossed up the rate. She's saying the net rate of #12.50 gross is #9.75. Which is only true if tax and NI are applied to the whole amount. If you look across a year, the first #10000 are tax free, so if she's earning a similar amount with the other family, she'll only pay tax and NI on the second #10,000, so her total tax and NI bill for the year will be #2,500. Meaning that if taken across the whole year, the net rate of #12.50 is nearer #11.00

Presumably her tax free allowance is already being used on her other job, so she's expecting full tax to be deducted from her wage with you.

It sounds like your problem is explaining to her why you shouldn't be liable for her tax - she expects a certain net wage and expects you to work out how to achieve that.

Things you might find helpful to ensure she understands....

• the deductions are HER tax to pay. Not yours (well, some are yours but not the ones you are arguing over). It is HER income tax - tax on HER income (and income-based NI but same applies). If she is earning over the threshold, she has to pay income tax - tis the law of the land.
• it is not fair that you should pay HER income tax when her other employer doesn't.
• what might be fair is that both employers pay the same hourly wage.
• how HER income tax is then deducted from her total earnings is then a matter of paperwork. It might be easiest for all the tax to be deducted by one employer. That doesn't mean she is being paid any less, just that the tax she owes because she earns over the threshold is collected in a particular way.

If she isn't happy with that, then she isn't happy with the way income tax/NI works and where the thresholds are set. Nowt to do with you.