Paying cash in hand for childcare

[itsybitsy]

I am looking for a part-time nanny, two days a week. A friend's nanny has contacted me to say her friend is interested but this person works at a nursery 3 days a week and doesn't want to complicate things from a tax point of view so would be interested if it is a cash-in-hand job. I'm not sure I'm OK about this - I wonder if it leaves me unprotected if we get into difficulties in our employee relationship. Does anyone else pay cash in hand or should i avoid it and try and make it all above board? The whole tax/NI thing seems so complicated, maybe this is an easy solution?

my advice would be don't do it if you intend it to be regular ie more than just occassional babysitting. HMRC will assume that you are paying her after deducting tax so will look to you as employer, not the nanny, for the tax (which will also be based on the grossed up value of what you have paid her).

Obviously this only happens if they find out about it - whether that is a risk you are prepared to take is up to you. I wouldn't.

You also have to think about insurance. God forbid - should anything happen, your nanny NEEDS to have public liabilty insurance. ALL childminders MUST have this and it covers them while caring for children. Childminders also must have class one business use on their car insurance.

No-one ever wakes up thinking they may have an accident, accidents 'just happen'. Insurance is a definate MUST in my opinion.

Sally

If you pay very low... think the limit is £83.99 per week, then you don't need to register as an employer. But pay above that and you need to do it all above aboard. PAYE for one employee is not all that hard now that HMRC provide an Employers CD-ROM and on-line access, and if you find it hard you can pay an accountant/payroll service to do it for you.

Nope I'm wrong... sorry. The less than £84 rule only applies if the person does not have another job. See here for details.

When I worked part-time as a nanny (3 days) and did 2 days at nursery, the easiest way of doing the Tax/Ni was for my 3 day job to be the Primary job and the nursery work to be secondary. Primary job took all tax free allowance, secondary job was done at basic rate tax. Whichever job pays the most should be the one which gets the tax-free allowance, this may, or may not be the job with the most hours. Doing it this way is easier than splitting the tax code. The HMRC Employers Helpline/New Employers Helpline will be able to talk you through processing the P46 form that is used to determine initial starting taxcode for an employee who has another job (i.e. an employee who has not given you a P45).

One key thing to agree with your nanny is a GROSS Salary, as if the nursery job kept the full tax-free allowance, then your nanny would be paying basic rate tax (think it's 23%) on your job, so as employer you do not want to agree a NET wage and find that you have to pay that 23% on top!

With regards to doing PAYE for a nanny, \link{http://www.mumsnet.com/Talk?topicid=2300&threadid=204158#4166928}link to thread with a worked example of paying someone for the first time}.

With regards to doing PAYE for a nanny, link to thread with a worked example of paying someone for the first time .

Reminder to self, always preview messages with links in them

Thanks so much for advice. I would prefer the 'above board' way but am naturally lazy, so it's good to know it's not too difficult!

Will read that thread NannyNick, thanks

Careful about the tax, assuming the nursery is not going to be willing to share the lower tax rate. So, for you, it is of paramount importance that you pay her in gross, not net.

Never never never be responsible for her taxes.

I would echo BradfordMum re the insurance situation. I discovered that our house insurance covered our nanny..and had she, for example, caused a house fire while cooking, or had DS caused damage to her (and it can happen - ny nephew knocked his nanny's front teeth out with a tambourine...with a huge bill for bridging work), it would have been covered by insurance. But we would have needed to show that she was an employee.

Nannytax can sort out tax for you. The nanny doesn't have to do her own tax so it sounds like she just wants more money.