Idiot's guide to paying a nanny

[Celia1978]

Hi all - these are probably stupid questions but I can't seem to find the answer online...

DD is currently with a childminder but for various reasons we have to change childcare and a (live-out) nanny is looking like the best option. I'm aware we have to pay NI (hers and ours) and her tax on top of the hourly rate but how exactly does it work? Do I pay it all to her for her to sort out? To HMRC? Someone else? How do I know what tax code she should be on?

If anyone has been through the process of becoming a first-time nanny-employer recently and could explain it to me I'd be very grateful... Thanks!

IIRC you can go through PAYE or other agencies who sort it all out but IME most Live Outs are paid Gross and set up as ltd.

Perhaps call an agency?

Agree gross pay, not net, particularly as you've already said you don't know her tax code.

Erm most live out nannies do not set up as limited companies!

What most people do is use a payroll company like PAYEfornannies or Nannytax. 100 a year or thereabouts.

You tell them the hourly rate and number of hours your nanny is going to work per month (you should agree a gross rate with your nanny, not net). They will then

• send you a payslip to send on to your nanny (legal obligation to provide payslips)
• tell you how much to pay to her (her net wage). You do a bank transfer or cheque or cash or whatever to her for this amount.
• every quarter, tell you how much to pay to HMRC. This amount will cover 1) the nanny's own tax and NI and 2) your employer's NI contributions. You make the transfer to HMRC (payroll co will tell you the account details).

All pretty easy. They will also make adjustments if your nanny's hours change, wage goes up, or whatever. Just tell them and they make the changes.

Her tax code is not your problem if you agree a gross wage.

Sorry I should have said they will send you a payslip and tell you what to pay her monthly. Or some do it weekly if you prefer (costs a bit more).

Get an employer tax company nanny paye or nanny tax do the same job. For around £200 a year They set you up as an employer with all the right codes, calculate tax code, issue pay slip and tell you what and how to pay HMRC.

You then pay HMRC online.

Agree gross rate - get nanny to work out their own take home using mr anchovy's tax calculator (also useful so that you can work out your total liability as you need to pay employer's NICs on top of withholding employee's NIC and tax).

Use a nanny tax company. They will set you up with HMRC and send you an update quarterly of what tax and NICsyou need to pay to HMRC (via bank transfer) on behalf of the nanny. I always get 3 or 4 weeks notice of the amount.

You then pay the net amount to nanny every month (by standing order or bank transfer - I've set mine up so that it is automatic) and nanny tax co will send them their payslips showing all the deductions.

You will need the P45 from the nanny from previous job before they start (or when they start).

Do you get childcare vouchers from work? if so, make sure nanny is ofsted registered - it is a small saving but every little helps!

Is nanny full time, such as doing 40 or more hours a week?
Is it all year round (except when nanny takes holiday) or is it just school term time?

Wondering if there is anything complex or if it will be their only job, no complicated work pattern.

Thanks everyone!

Nothing complicated: 40 hours-ish a week with normal holidays. No sharing, she'd just work for us.

Recommendation of getting a company to take care of it all sounds good!

She said she charges £9 an hour (this is in London btw) so going by the tax calculator I think we'd actually be paying approx £11.18 gross so she gets that £9 an hour net.

I think that makes sense now! Thanks again.

Advice above is good and I'd hang on to her - London going rate is £10 per hour net so you have a bargain there. As said above, you pay her monthly and HMRC quarterly. PAYEfornannies are excellent and for an extra £20 per year you get access to their employment lawyers if you ever need them.

I know it has been said but agree a gross salary

"She charges £9 an hour" - no she does not. You are the Employer. You decide how much to pay. You offer the job, she decides to accept it or not.

If she is wanting £9 an hour, is that take home (Net) or Gross? Net to Gross is not an exact science:

With taxcode 1000L (tax year 2014/15) and nothing special, then
If they work 40 hours a week - £9 net = £11.15 gross
If they work 50 hour a week - £9 net = £11.57 gross
Net to Gross does not really work as the Gross amount will change depending on number of hours per week.

So as you are in London I would guess that £9 is not the Gross amount she wants. I suggest you come up with a gross figure and settle on that. £11.20 perhaps, £11.50. YOU decide what to offer, let her decide if she will accept it or not. Do NOT give any guarantee of a take home wage amount.

Contact a payroll company and see what the current procedure is for setting you up as an employer. They may be able to do that for you, though you may need to activate things such as GovGateway, HMRC Online. Talk to a payroll company.

As has already been mentioned, the process once underway is:

Monthly payslips
You pay the nanny the net amount shown on the payslip
You put aside the deductions shown on the payslip (employee NI, employee income tax, employer NI).
Once every 3 months, you pay the money you put aside to HMRC using a specific payment account (your payroll provider will remind you of when to do this, the account number, sort code, reference number to use).

Once a year the payroll company will ask you about any other payments made to your nanny, such as for mileage (you will also be asked number of miles).

The payroll company completes the Employer Return (P35). They will issue a P60 to your employee (this is usually in May) and will issue a P45 when your employee leaves your employment.

If your nanny will not agree a Gross salary, then you MUST use a payroll company.

If you have the time and feel the effort is worth it, you can do payroll yourself as long as the nanny has agreed a Gross salary. You use the HMRC Online system plus writing out payslips manually, or you can use software like Brightpay.

Nanny payroll companies vary in price and what they offer - all will offer the basic service of producing Monthly payslips and doing electronic filing of documents to HMRC.

I agree offer a gross salary - you can tell her it works out to £9 net using such and such on line tax calculator and assuming 1000L tax code.

My nanny quoted £9 net and I was terribly worried about offering her a gross rate instead (having said £9 net in our initial job offer!) but she was totally fine about it. in fact I think she liked it as it made it clear we intended to pay her tax etc fully