Nanny Tax - Benefit in kind?

[pommedeterre]

A nanny tax question! I thought I was all sorted on this!
We pay nanny on our company payroll (so £30 a year rather than £300 with Nanny Tax). We also pay just over £1000 of NIC charges a year on our P11D (over and above her monthly tax I mean).

If you use Nanny Tax (or similar)do you still have to pay this benefit in kind charge?

My accountant is (as normal) next to useless and has just emailed me the nursery vouchers benefits in kind details in response to this question!

I don't understand what you mean about paying nanny on company payroll. Are you saying your company employs the nanny? Or are you just asking your company's payroll service to also deal with your own (personal) nanny's payslips and tax etc?

If I've understood you correctly, I think the answer to your question is yes - I use a payroll company (PAYEfornannies) and yes we have to pay quarterly NIC sums to HMRC. It's not a "benefit in kind charge" though, it's our employers' NIC charges.

I may have misunderstood though, apologies if so!

Yes, we don't put her through the books as tax deductible or anything (!), we just use the pay roll service to manage her payslips etc.

We pay £494 a month tax for her (£1482 net for her) and this yearly £1000 charge. It seems a lot suddenly and Im wondering if saving on payroll is actually creating issues for us!

Hmm not sure whether that sounds right or not to be honest. Here's what we pay, so you can see how that compares with ours.

So, for 1 month we have to pay:

1 - 1737 net to nanny
2 - 183.50 nanny's employee NI
3 - 271.60 nanny's tax
4 - 211.09 employer NIC contributions

2 3 and 4 are paid to HMRC.

Sounds like your amounts are about right (you are paying 7000 to HMRC per year whereas we pay about 8000 a year, but our nanny earns a bit more than yours) however they should be able to give you a breakdown if you query it.

There should not be any benefits in kind unless you are providing a car or accommodation.

Being paid by childcare vouchers is not a benefit in kind for the employee.

Sounds like payroll service may be getting confused and thinking nanny is an employee of the company.

No car or accommodation. I think the benefit in kind is for us, as in she is the benefit ?!

Childcare vouchers doesn't apply anyway as we earn over the limit.

However mini pie's numbers look quite reassuring that we are not getting fleeced using our solution!

Surely running her tbrough your company scheme means your missing out on the 2k ni rebate though?

NI rebate doesn't apply to "domestic staff" which included nannies.

Are you paying £1k as a round sum of NIC? That sounds odd.

However, there could potentially be other benefits above and beyond car and accommodation - what are your arrangements for bonuses, entry tickets, petrol, meals, overnights stays, etc etc?

You mention a P11D - what are you completing on that?

If you are paying £1000 Employers NICs, then nannies salary is a little over £15,000 gross a year?

But you say you are paying £1482 Net per month, so with a 1000L taxcode, 5 days per week, 40 hours per week, then I make that £21,806 gross a year, with Employers NI being nearly £2000.

MrAnchovy's PAYE Calculator

I can't get £494. I can get £495 so that is probably the thing (PAYE calculators are not precise, they are a guide) so to get that figure I used:

Monthly Net Pay £1482, Days per Week 5, Hours per week 40, Taxcode 1000L, No Student Loan.

The £495 is the total of: Employee Income Tax, Employee National Insurance, Employers National Insurance.

So that then begs the question, what is the other £1000 a year charge for, as it is NOT Employers NICs.

My gut feeling is that something is going wrong - maybe they are somehow seeing your nanny as being a benefit to you as a director (assuming you are a director). Maybe it is some kind of employer supported childcare directly contracted.

I would separate out your business from your household staff. Get different payroll agencies to do it. PAYEforNannies charges around £125 a year, sure it is more than you are currently paying but it is less if you get this strange £1000 charge for doing it via your company payroll provider.

I am not an accountant but it looks odd to me. So if your accountant can not tell you exactly how things are calculated, then I would worry as an accountant should be able to tell you.

I would separate out your business from your household staff. Get different payroll agencies to do it. PAYEforNannies charges around £125 a year, sure it is more than you are currently paying but it is less if you get this strange £1000 charge for doing it via your company payroll provider.

I am not an accountant but it looks odd to me. So if your accountant can not tell you exactly how things are calculated, then I would worry as an accountant should be able to tell you.

I am an accountant (lapsed) and I agree completely!

Are the payroll bureau charging you £1000 a year to run the payroll?

Are you sure the £1000 NICs on the P11d isn't for some other benefit you are receiving from the company and not related to the nanny at all (eg do you have a car?) You should be able to get a breakdown from the accountant of what the P11D charges are for

Both Dh and I are directors of this company and owners too. We currently work as directors for another company and this company is used rarely for small amounts on various projects we take on ad hoc.

The move to 1482 and 494 tax was a couple of months ago. She currently works 38 hours a week over four days. Pre that was 30 hours over three days and was 1170 net and 240 (? Ish ) tax monthy.

The P11d shows a small income we have paid NI on for us and then the nanny. We owe £1079 on the P11D for the nanny apparently.

Our accountants have been getting progressively shitter over the last two years. It's just everyone around us uses them (my dad, his business partner, companies we consult for etc) and we have done some complicated things (year abroad) so thought it was just just us.

So if I use a nanny tax scheme I'd get the £2k NI rebate?

They assured me at the start of this it would all be fine and I thought I was saving lots but I think this must be being seen as a benefit in kind i guess.

If payefornannies is only £125 then I think we really need to think about moving. They have not made things easier or clearer which was partly the point of doing it through the company!

I am an accountant (lapsed) and I agree completely!

So glad

Would love to know if you ever manage to find out what this £1000 charge is for.

I wonder if it is something to do with Class 1A National Insurance, which is due in July. HMRC: Class 1A
Accoding to HMRC: Rates it is 13.8%. So if it was a £1000 charge, then it is on benefits worth a bit under £7250. Does that fit with anything on the P11D?

So if I use a nanny tax scheme I'd get the £2k NI rebate?

No, nanny employers are exempt. Details

It sounds like a benefit in kind charge on you as directors for the nanny being paid through the business. It is likely to be a class 1a nic charge on the excess of amounts paid by the business over and above the tax free limits available.

It does sound messy but it may be right. Don't just slag off your accountant, ask them verbally for a proper explanation. I imagine you were originally advised against putting the nanny through your payroll as it is not as simple as whether or not you are trying to tax deduct it, it can still be a benefit in kind.

Ps I am an accountant too and would not advise putting the nanny through the business payroll, it is a false economy.

Sorry, cross posted.

I run payroll for a company & I am confused.

As directors ofvthe company (I assume it is limited) the P11d benefit in kind could be the use of the payroll company for you personally I guess) but I'd have to look it up.

A. P11d is usually for company cars/vans/ petrol in your personal car etc.

Ok I've just had a quick flick through. If the nanny is going through the company payroll then she is employed by the company but providing services to your family personally so she is a benefit.

So what you need to do is to raise an invoice from your company to you for the amount of the wages & pay the invoice a bit like my parents employees write a cheque each month for their personal mileage in their company cars. (I think)

nannynick - that matches the other bit on the P11d - the income declared as a loan scheme thing (long weird story due to being abroad a year). The amount for our nanny was just under £4k.

I am going to have to phone and demand an explanation. That normally just leaves me more confused! Thanks for your help everyone.

shouldwego - I checked a couple of times with them before doing it this way, they assured me it was fine.

They're quite expensive as well!

Pre that was 30 hours over three days and was 1170 net and 240 (? Ish ) tax monthy.
That does not seem right, least not for Employee NI, Employee Income Tax, Employers NICs added together. It may be about right for Employee NI and Income Tax in 2012/13 tax year.

If you are looking at changing things, then please do consider agreeing a gross salary with your nanny rather than Net, as changes to your nannies financial situation can impact on what you pay with a Net Pay Agreement.

What tax year is the P11d for? 2013/14?

If the nanny is going through the company payroll then she is employed by the company but providing services to your family personally so she is a benefit.

That seems likely but why isn't the Class1A figure higher? The nannies gross salary would be around 16,500 (if 1170 net per month, 30 hours per week, tax year 2013/14 taxcode 944L) - if that was all put on the P11d as a benefit, would it not all be taxed at 13.8% (Class 1A)?

that matches the other bit on the P11d - the income declared as a loan scheme thing

Well that may explain it. Nothing to do with having a nanny, it's a charge for something unrelated to employing a nanny.

Except this am she said it was for the nanny!

Thanks all. Am going to look into gross pay, tax on net has so far been a minefield.

The amount for our nanny was just under £4k
That sounds as though it may fit with nanny being paid 16,500 gross (1170 net, 30 hours, tax year 2013/14, taxcode 944L), as Employee Income Tax + Employee NI + Employers NI would total around £3700.

This is so confusing, though it sounds as though you may have identified what has caused the charge - the loan scheme thing.