Help! Nanny NI and Tax...

[SchtenGraby]

Really hope someone can help...

A potential nanny would work for us on a self-employed basis (she has told us that she is self-employed and does other work - both nanny and non-nanny work).

With regards to the 'Lower Earnings Limit' she will earn less than £100 per week from us, but with petrol expenses this may go up to £150 per week.

She will not work during holidays so if the LEL is annualised this would bring the amount she earns (even including expenses) to less than £100 per week.

Please can anyone help with whether we are liable for any Employer's NI or tax?

Would this change if her petrol expenses took her over £160 or £170 per week?

Thanks ever so much...

You will find it very difficult to convince HMRC that your nanny is self employed. See here: www.nannytax.co.uk/employment-law/self-employment

In any event the LEL you refer to isn't per job, it's per annum. So you would need to know what her earnings are from her other jobs/PAYE code to be able to operate PAYE correctly.

Many thanks lucidlady - really helpful.

So, sounds like Self-Employed status may not apply. In which case, we need to find out her total earnings per year and then divide by 52 to get see if the LEL is breached.

Do petrol expenses count as earnings?

if she is your employee and you pay her petrol, it's taxable unless you only pay the petrol required for her to perform her employment duties - so if it's petrol from her home to yours then that is taxable. If it was petrol for taking your child to a class, ie from your home to the class, then that is arguably employment related but how on earth do you work out what the petrol cost is for that!

She can be self employed if she is doing at least 3 other jobs. Whether they are nanny jobs or other jobs.

You will pay her a gross amount per week, either as she earns or pro rata, she must give you an invoice before pay day so if she is not declaring her income, you will not be liable for her back taxes. It must contain her full name, address, hours she has performed for and rate you pay per hour.

Petrol expenses - you just pay her an agreed rate per mile, this is her expenses not yours. You do not need to factor this into her wage.

Good luck.

Many thanks both - the question about whether petrol (to be clear - from our home to school and back - not the nanny's home to ours) was about whether petrol expenses count as 'earnings' in relation to the calculation of the 'Lower Earnings Limit' of £150 per week or whether 'expenses' are separate to 'earnings' for those purposes?

Get her to submit an expenses claim for number of miles from your home to school (itemised) pay her this (separately to salary) according to HMRC fixed profit car scheme. There will then be no tax implications for you or her.

Mileage payments (for logged mileage done as part of their employed job) would not be taxable or considered income for purposes of LEL, subject to a limit of 10,000 miles per year.
Details are available at Gov.uk Mileage and Fuel allowances and at HMRC EIM31200
A useful document is TCM0118200 which says "Mileage allowance payments which do not exceed the approved amount for each kind (calculated by multiplying the business miles in that kind of vehicle by these rates) are not counted as income. Where mileage allowance payments are paid in excess of the approved amount, the excess is counted as income." This document is in relation to Tax Credits but it would be reasonable to presume that the same applies for the earnings threshold for LEL. If you need a definitive answer, then you will need to ask HMRC.

Mileage should to be logged as evidence, so a typical log would give the date, destination, start and end mileage, total mileage. Keeping that on a paper log in the nannies car and transferred to a spreadsheet monthly is fairly easy to do and their mileage expenses can then be emailed to you, thus you keeping a record, so you can prove the mileage was done if there was ever an investigation.

If you are using her services on a self employed basis the lower earnings limit is irrelevant. She charges £x hourly rate and you pay that full rate per hour. She then pays her tax and ni via her tax return.

If she's doing two other jobs and this is her third and she works on an ad hoc basis she could well be self employed. Her expenses would be for her to claim from you and a log as described is fine. She would need to keep the log and any relevant receipts (ie not mileage but relevant) for six or seven years (I forget which) in case hmrc want them. You can ask to see them/have copies and she should detail a separate line on her invoice for expenses.

The employment status issue is more complex and maybe the thing to do would be to get a Status Decision, though I can't see why the nanny would want to be self employed if this is a permanent job that you are offering.

The issue I expect is that you will be wanting them to be obligated to turn up to work, when you tell them to, rather than when they decide to get out of bed! The work is probably not sufficiently occasional for it to be the nanny providing you with a service - like it would be with a babysitter.

Employers NI is based on earnings in each job someone has, rather than all combined (like Income Tax), so it will depend on the salary being paid. Secondary Threshold (ST) is currently £153 per week/£663 per month, this is the point that Employers NI becomes due. Earnings of £112 or over per week have to be reported, as this is the point that your employees NI record gets credited (such as for purposes of state pension entitlement).

With regard to frequency of reporting and thus which particular limit applies for the LEL, then I believe it depends on the pay frequency. So if paid weekly, then weekly limit applies. If paid monthly then monthly limit applies.
This is something you could check with HMRC New Employers Helpline.

This is to the best of my knowledge, so could be wrong, so please do check with the New Employers Helpline and do consider using a Nanny Payroll Company as that will often cost you around £10-20 a month and save you the hassle of dealing with the payroll admin.

If they are an employee and are working Term Time Only, then they would still be entitled to Statutory Holiday Pay.

A lot here seems to be resting on how regular the work is and the obligation to do the work, plus who is really in control. Are they just going to do occasional work as and when it is convenient for you both, or is this a weekly arrangement that happens every week during school term time?

Try calling some nanny payroll companies and seeing if they can help you determine the likely employment status of someone doing the work you are wanting a person to do. It is tricky to get right and it has cost implications but if you make the wrong decision then it could cost you a lot more.

If in any doubt, I would make them an employee, as then you have the control and decide what they do, when they do it, could even tell them how to do it.

Massively helpful MovingOnUpMovingOnOut and (especially) nannynick.

Thank you ever so much.