National insurance for nanny

[Mumpbump]

Dh thinks that national insurance is included in the tax that you pay. I think it is payable separately - at least it always shows up separately on my payslips. I can't access any nannying websites from my work, so does anyone know the answer to this? If not, will call the dread IR.

Ugh! Thought that would be the case... Any ideas roughly how much the NIC works out at as a percentage of their salary??

Part-time with her own child. I have no idea how much she gets from the other family, but I have asked them which payroll service they use as I think it would be easier to use the same one. I hadn't appreciated that we would be paying NIC for both her and us as employers!! You would think I'd know better given that I've been in employment for 12 year, wouldn't you? Suspect she will be in the 11% band - I assume you work that out on the basis of the gross salary?

I have worked out that the equivalent gross salary (on the basis that she pays 29% tax) is £6.45 per hour so if I add on 11% NIC for her and 12.8% for us, that makes it about £8 per hour all in. Do you know if I can calculate our liability like this or is it is over-simplistic because it's only part of the picture?

Sorry to bombard you with questions - I will buy you a drink/coffee at the next City meet-up!

contact nannypaye.co.uk. they can answer all this and do it for you for a very reasonable fee. (£150 or something annually)

Unless of course you are going to get Jurato work it out here for free.

What a mess agreeing a NET wage causes... presuming you have agreed a NET wage Mumpbump.
With luck you will be able to get this sorted out but it could take quite a few calls to HMRC New Employers Helpline. The other family involved may not want to split the tax code (after all, they may have agreed a NET wage) so it is possible that all of the nannies gross wage is taken into account for Tax/NI purposes while she/he is in your employment.

If it isn't too late... agree a GROSS salary.
If it is too late, then your idea of contacting the same Payroll company is a good one, though not sure what they can do, if the other employer involved will not agree to splitting the tax code.

With regard to calculating pay, alas your percentages are a bit simplistic. While giving you a guide, I don't think HMRC will accept figures based on that.
I would suggest that you read the HMRC Guide to Paying Someone For The First Time . It takes you through calculating Employees Tax, Employees NI and Employers NI for the first payroll run.

I'm not a basic tax payer so am unfortunately clueless about the lower bands! I was assuming that the full amount would be taxable as the other family will have used up her personal allowance. I have also said that whatever figure is stated in the contract will be gross, but that I will ensure that it equates to £5 net on the basis that if her tax situation changes, I don't want my figures to go up! Chances are it would only go down...

I just thought that using the same payroll would mean that they would know what her other earnings were. Do you mean she will get we will get our very own tax code for her? I will have a look at the website when I have a bit more time, but will certainly be employing someone to sort it out for me as I have no idea about tax, NIC, etc. as you can probably tell!

Thanks for all the messages. I will let you know how I get on!

but that I will ensure that it equates to £5 net on the basis that if her tax situation changes, I don't want my figures to go up!

Not sure I understand. By agreeing a GROSS wage, you are ensuring that if your employees tax situation changes, your figures don't change. If you tell your employee that they will get a specific amount net, then if their tax situation changes, you foot the extra bill!

Stick with agreeing a gross pay figure, don't even mention net wages.

Tax coding is up to HMRC to sort out. If your nanny has another job, which takes all the personal allowance, then you just start your employee off based on the tax code from what they tick (or don't tick) on the P46 . I would expect that Box C would be ticked ("I have another job or receive a state occupational pension") thus initial tax code in your employment would be "BR cumulative". Once HMRC have the P46 details, they may or may not issue a Coding notice - a new tax code to use. Then throughout the time your employee works for you, you may receive coding notices... so do not assume that the tax code will remain the same... thus agree a Gross wage, do not commit to paying a specific net amount.

You need to keep in mind how the system works.

As an employer, you deduct your employees Tax and NI contributions. Those are your employees tax/ni payments, you as the employer are just passing those to HMRC on their behalf.

The employers NI payment is the thing you as employer pays to HMRC, and it is calculated based on the Gross pay of your employee.

So while you make 3 payments to HMRC:
Employees Tax
Employees NI
Employers NI
The first two are not your payments as such, but are made on behalf of your employee. Hope that makes sense.

Blimey - this is complicated. Definitely employing payroll service! What I meant is that I will agree £5 net now, but put the gross equivalent in the contract (once I have worked it out) so that the gross equivalent will be the contractual rate.

I thought that she would be paying 29% (or possibly 22%) on the whole amount because her existing family will use up her personal allowance (I agree that asking them to give that up will go down like a ton of bricks!!) so I could just gross it up like that. Is that right? I think I'll just tell her that I've calculated the gross equivalent to be £x and could we agree on that as it simplifies things for me... Will let you know how I get on!

could you not just pay her in cash,seeing as she is only part time?

Well, I could, but I don't think it is worth the risk of someone else finding out and ending up being fined. We're really pushed financially at the moment as I will be going on maternity leave again in August (statutory minimum pay) so we couldn't afford a huge fine. Plus she would miss out on NIC which isn't fair on her...

Once you get your head around it, it isn't as complex as it seems. It took me a while to understand but doing a dummy work though following P49 helped to clarify how it all worked.

What I meant is that I will agree £5 net now,

Please don't do that. Please take our advice and agree a gross wage... do not mention about any net payment to your to-be employee.

You can use Listen To Taxman to do some calculations.

Lets do an example. For now lets say your nanny is to work 25 hours per week, and you are aiming for her pay to be 5 net per hour give or take a bit for this particular moment in time and based on a BR tax code.

So lets enter 162.47 in the My Gross Income Per Week box, and enter BR in the Tax Code box. Click calculate and you should see that for 2007/08 tax year, weekly net is £125. The tax free allowances section on the table will show as 0.00, as we are using BR tax code.

From the table you will see that Gross Pay per year, on this basis is £8,448.44.

You can now use that figure to play around with the figures so that you get a reasonable gross salary figure for use in the contract, which would result in close to your desired 5 net per hour. Perhaps £8450.00 for example.

Using Table A in the NICs Tables See CA38 (I expect Table A would be used, though it may not be, but good enough as an example)
and using Annual Gross Salary of £8450 (thus £162.50 per week), on page 11 of the CA38, you can find Table A weekly, showing the nearest lower figure as £162, so looking across the table, employers NI is £8.00

So assuming the same pay every week, then for a good guide as to how much it will cost you as employer, we take the Annual Gross salary £8450 and add (£8 * 52) £416, giving annual total of £8,866 - so to be safe budget for £9,000.

£8450 gross pay, based on 25 hours per week, is 1300 hours per year, thus £6.50 gross per hour... which is above National Minimum Wage.

I think I'll just tell her that I've calculated the gross equivalent to be £x and could we agree on that as it simplifies things for me...

Yes, do that... tell her it is £x per hour gross, or even just give a per annum figure, such as £8450 gross per year.