Nanny tax difficulties! (Venting)

[IronMaggie]

I'm annoyed about a couple of things and am trying to get a sense of if I'm being unreasonable, and what the solution might be.

(And I appreciate that I might sound whiny, but that's the frame of mind I'm in at the moment! I hope this is a 'safe' space to air this!)

Firstly, I don't understand why nannies are the only category of employee for which the employer has to pay the employers AND the employee's tax. It seems incredibly unfair. It feels like we're only just coping at the moment (it's all relative, I know) and I can't see how we could do our jobs without our nanny or similar. My nanny is paid a fair salary for the job she does and I wouldn't want it any other way, but it just seems punitive every time I have to pay our quarterly tax bill.

Also, I'm finding the administration involved in paying the correct tax the biggest nightmare ever! I seem to spend hours on the phone to HMRC and my payroll agency every quarter, bouncing between them to work out how much I owe exactly and who's at fault for getting it wrong this time. Surely it shouldn't be this difficult! Is it just me that has this problem? Feel free to tell me if I'm just being incompetent - I haven't ruled that out as an option. I suspect that the agency I'm using isn't helping matters either.

So what's the answer? My question is partly about making it more affordable, but more importantly far less STRESSFUL!

Getting someone with less experience, i.e. cheaper, isn't a route that I want to go down, although I'd be lying if I said I hadn't considered it (it wouldn't remove the HMRC stress though!) DP thinks we'd be crazy to do that, as our nanny has been with us for 3 years and is very good.

If it helps, our DCs are 5 and 3 (starting reception in Sep '17), and both our jobs involve travel, sometimes at short notice.

I feel your pain. It's why I went for daycare and supplement with hours around daycare. I'm in the U.S. and the IRS make it super easy because the vast majority of nannies won't work on the books. I'm a CPA so must have people on the books. I hire my sons ex daycare teacher for wrap around hours. I use a nanny payroll company here in the US. I also pay a salary so it's a fixed amount per pay period.

Pay a nanny payroll company to do it. It's about £140 per year, just google and work with them over email. It will solve all your stress over this.

Thanks both, I do have a payroll company but it still seems to cause problems. Some of these I could avoid by being more organised, but still...

As an example, the company I use don't send out subscription reminders so unless I spontaneously remember to pay their annual fee, they don't flag when the next HMRC payment is due, which means a late payment, which spirals off into all sorts of other problems. So yes - partly my fault, but still something I'd rather not have to sort out amongst all the other things on my plate.

Polly, just out of interest, which company do you use? My current one aren't particularly proactive / responsive...

Wait till the pension nightmare kicks in. It is hideous too.

Diarise the subscription reminder in your phone as an annual event. Simple solution. I also diarise a reminder to pay the quarterly tax 2 weeks before the deadline then 2 days before as well. Often I schedule the payment in my online banking to go out on the right date - I'm not paying thefuckers early but I never pay late.
Which co do you use? I used one of the smaller outfits and must admit i rarely had a problem (paye for nannies).

The NI rebate annoys me more, j have to say. Partic since they did away with the refund of SSP

Us nannies are not the only people who's employers have to pay our tax and ni as well as employers ni. All employers do this. You agree a gross salary to start with not a net like all other professions and then the employees tax and ni comes out of that just like yours comes out of your gross wage and then you as an employer pay employer ni as well just like your employer does for you.

It is when you agree a net wage that it seems like you are having to pay more out than you thought. Which is why it is so important like in any job/profession to agree a gross wage and have that in the contract.

asg very true - we have agreed a net salary, and I think it's the physical act of transferring the money to HMRC that's painful. If it came out at source in PAYE perhaps I wouldn't notice it as much. Irrational, I realise!

And thanks Free, I've set a reminder for next year's subscription so it ticks over seamlessly. And I shall henceforth refer to HMRC as 'the fuckers' too

Whether you pay net or gross you as the employer still have to transfer the money to HMRC each month, it is part of your responsibility.

Change your payroll company. I have used www.payefornannies.co.uk for years (there are others, obv) and they are good value for money, and they give me plenty of reminders - monthly payslip reminds me re quantities, and paper invoices and reminders for HMRC and their own fees. I am getting them to do my nanny's pension now too.

You say 'if it came out at source' - we (the employer) ARE the source. How else are HMRC supposed to get the money except via the employer?

You sound pretty stressed by it all, but I think you'd find a new payroll company that fits your needs a bit easier.

Lonecat I hope I haven't given the impression that I'm not paying my taxes. I very much am. I do it quarterly rather than monthly though.

Minerva by 'at source' I think what I'm saying is that my nanny gets paid by direct debit (or standing order, I don't know the difference), and I don't actively have to DO anything to make that happen. The same isn't true of paying tax, which is an error-fraught and administratively difficult process. For me, anyway. I am going to look into switching agencies, but I've just paid up for another year so will have to weigh that up too. I've just seen lots of complaints on here about the company I use, so it seems I'm not the only one that struggles with them.

Also from the tone of these responses, it looks like I am being unreasonable and everyone else just gets on with it. I'll try to get my affairs in order. I'm normally a numerate person, but dealing with HMRC / payroll just defeats me for some reason.

All types of employees have to pay employers ni and also employees tax if they've agreed net wages. This is why everyone agrees gross salary not net and maybe why you are having the stress working out the tax. It's a giant pain to have to do it that's way around for any patrol company but yours doesn't sound great. We do Nannytax it mostly works.

You don't pay the nanny's tax, so it's silly looking at it that way. She pays tax, you, like every other employer, just deduct it from her wage.

The HMRC PAYE online system you do yourself (ie no need to have a payroll company) is actually reasonably straightforward. The monthly day to day payments are very easy, the only slight complications are the end of year stuff or when a nanny leaves or starts but the new employer helpline is very good (although often a long wait on the phone). Once you get used to it it's ok.
Sounds like you are having difficulties with the payroll people anyway so maybe consider doing it yourself?

Work out what the nanny's pay normally is once it's been grossed up. Have a meeting with your nanny to agree the new gross pay figure. This will make your job as an employer easier and will protect you against any tax changes she has.

She pays her own tax and national insurance, but you, like every other employer, plays it over to HMRC with your employers national insurance.

In the payroll agency's defence, the main errors made have been made by HMRC. They spontaneously claimed that I owed £15,000 in tax for a single month (not remotely possible), so all subsequent payments went towards covering that.

The last adviser I spoke to said it was 'one of those random things that happens sometimes'. I'm also told something slightly different every time I call them. In the meantime I receive menacing letters with ludicrous amounts owing on them.

It's taken me dozens of phone calls over the best part of a year to work out what happened, and what needed to be done to fix it. That's a lot of detail, as I'm now trying to justify why it's not sheer silliness on my part - I just feel aggrieved at being at HMRC's mercy and having had to spend time doing all this. I suppose it is part of being an employer, but it's not something I'd have to deal with for other forms of childcare. That's what I mean by unfairness, but point taken.

Thanks all for the comments.

And yes, I'll look at switching over to gross payments too HSM. Will hopefully make life a bit easier...

Changing to gross payments is a good idea, though will mean you can't use your current system of paying your nanny by standing order, as the net pay amount will change slightly at random times during the year. A plus point though is that you are not using standing orders anymore, so your nanny gets paid faster, as banks can take a few days to process a standing order on bank holiday weekends but if you just do the payment yourself via internet banking, it sends it instantly via fasterpayments.

There are a number of issues here :-

1. Never ever agree to pay someone a net figure
2. You are not paying the Nannies tax, it is deducted from her Gross pay and you pay it over to HMRC as the employer, the same as every other employer
3. Your payroll provider sound like a complete nightmare - you should receive a payslip monthly and a figure that you need to pay to HMRC and the date by which this is due. When this comes in by email just set up the payment to go by the due date

It sounds like this is so much more stressful for you than it needs to be x

I don't understand why nannies still want Net pay either. I have been supporting campaigns in to moving to Gross pay for many years now and educating nannies and parents about Gross pay via here and other sites.

The good news is that some agencies are now advertising jobs with gross salaries and I hope to see more of that happening.

Why do nannies like Net... well, I think some people find it hard to budget, so like to know exactly what they will get in their pay each week/month.
Many nannies come from a nursery background and will have been paid a gross salary at nursery, so more nannies are accepting Gross pay agreements now but you may find even some from a nursery background want a Net salary - I really don't know why. Any nannies reading this who want a Net salary... why do you want a Net salary?

Gross salary helps parents and nannies in my view, as it means that parents can calculate the cost in advance. Sure a payroll company can do this for parents when they make an enquiry but until the payroll is actually run the total cost won't be known for certain and it can change throughout the year.

Gross pay taxation is easier to understand... Employer pays Gross pay + Employers NI. Employer deducts income tax and employee NI and what is left is the pay to the nanny, the net pay. It is like any other job.

HMRC take payment from employers every 3 months if your tax bill is below £1500 (I think). Once above that they want the taxes paid monthly. Would it be better to have the tax bill every month? Maybe but more tax bills means more chances of paying late - last thing you want is HMRC chasing you for a debt.

Is more explanation needed when signing up to a payroll company about how the tax payments work, or do you get enough information all ready?

I don't know why you are getting overly involved in contacting HMRC. Yes HMRC do contact employers but they do know that you have appointed an agent (do you remember signing two HMRC forms giving your agent 'payroll company' authorisation?). So all you should do is to pass the letters on to your payroll company to deal with. They will then spend a huge amount of time trying to HMRC to resolve any problem and reflect any payment changes needed in the next tax bill.

What can make the system not work is when a parent pays HMRC the wrong amount, or pays the right amount but HMRC allocate it to the wrong place. It can mean that your record shows a payment being owed, when you have in fact paid it, it's just not been matched up in the records.
Then there are times when HMRC just get the figures completely wrong! The RTI system and monthly returns should be making that situation better but as with all systems, errors do occur.

Freebutton - The NI rebate annoys me more Yep, why did the Government tell us all about that and then remove it from domestic employers.

I wonder if other forms of childcare do have similar issues but the end user does not see it. A nursery could be employing a lot of staff and having a lot of calls to HMRC to sort out payments, tax codes, new employees starting, people leaving, and then they have things like corporation tax. Then they have other agencies to deal with - local authority (who deal with education funding as well as business rates and planning issues), commercial refuge and hazardous waste collection, regulatory body such as Ofsted.

A parent with a nanny sees a lot more of the admin side than a parent who uses a nursery or childminder. Not sure there is a solution to that. I do try to write more information for parents and nannies about various aspects of nannying, such as guides to registration, factsheets about various topics.

PAYE Basic Tools is available but there are many low cost software offerings available from commercial providers that do a better job, so I would expect the Basic Tools to be ditched at some point. Certainly reading this (pdf) it does appear that the tool may not continue to be updated. A separate tool has been created to help with pensions.

Doing payroll yourself... I would avoid the stress. That is what a good payroll company does for you, they reduce the stress involved, leaving you with managing your employee and paying the money. So talk to other payroll providers and switch to someone you feel will suits your needs.

I think the whole net pay malarkey is crazy. I suppose it might sound attractive to nannies, particularly young ones, because they can envisage exactly how much they have in their pockets. But anyone on a net pay arrangement will not have benefited from any of the tax breaks there have been recently designed to help the lower paid (eg steady increases in personal allowances). I think agencies are a lot to blame for insisting on the magic £10 an hour net.

I don't know about nannies, but I'm bemused as to what your payroll agency is actually doing.

I run a small business and use SageOne to do the payroll, and it is an utterly trivial task each month. It took a little while to set up - as in, maybe 5-10 minutes for each of our employees - you put in the employees PAYE code, address, that sort of thing.

Each month I need to put in wages earned/hours worked, and it generates the payslips, tells me what I need to pay HMRC, and what I need to put in everyone's pension (we chose to set up pensions straight away as employees wanted it rather than wait for our autoenrolment staging date). It really is completely straightforward, and if someone is charging you money to do it and it's still causing you grief, they're ripping you off, I'd say . . . (Sage One isn't free, mind you, it costs £5/month for up to 5 employees, so £60/year, but it's way easier than the free HMRC tools)

Sorry, just realised the cost is + VAT (we're VAT registered so get it back). I really think your payroll agency is crap, though - I've been doing payroll for my business for years and I can't think that I've ever spent hours on the phone to HMRC. (Even including the time I accidently randomly sent a bank payment that should have gone elsewhere to them - short of sleep when dd was small - I just wrote them a letter explaining and they refunded the money.)

Thanks NannyNick, always good to get your input. Agree I wouldn't take on managing the payroll myself, I think it's beyond me.

On the choice of a net salary, our nanny said that she wanted to be able to guarantee that she'd be able to cover her outgoings - her mortgage, insurance etc are all a fixed amount so knowing that she'd get a fixed salary was what she wanted at the time.

Once she'd said that, we didn't really explore the gross option, so I need to have that conversation with her. At the time, we wanted to make sure she was happy as we really wanted her to accept the job. (No excuse, I realise - that's just where we were at the time, and she was far and away the best candidate we interviewed).

Stick, she's not young, but she does like an easy life. I think I'll need to make clear what the benefits of switching from net to gross are when I talk to her. Is there a guide to switching for employees anywhere?

Sadik, I think you're right - my agency could do more. I have on my list to call one of their competitors to get a sense of what the implications of switching are. As long as it doesn't cause me any extra admin I'm happy to incur a small fee for it.

I also use PAYE for Nannies! And you've just reminded me I forgot to pay them for this coming year!!!

(secretly glad I'm not the only one Polly) :)