Nanny not wanting to pay tax

[wizzywig]

Hi, can anyone tell me who is right here? I thought employers paid a nanny a gross hourly rate. My nanny is adamant she wants me to pay her tax and she just pays her own NI. So i found out what net hourly rate she would need to be paid (from my payroll company), but she is still saying I should be paying her income tax and that her other 3 employers are doing that. Any idea if she is right? Thanks

It depends if you're employing her or if she's self employed. If she's working for 3 others at the same time then she would be able to be legitimately self employed.

Personally I wouldn't want to employ someone. You'll have to pay holiday and sick pay ect.

Sorry i shouldve added that she doesnt want to be selfemployed

She is paye with all the other families

Is she a regular nanny or an occasional babysitter? HMRC generally view nannies as employees so you need to pay tax, NI, statutory sick pay and pension contributions. I would get advice

You can't just decide a role is self employed. HMRC have tests.

She is a regular nanny, works the same set day forme

Im paid paye, so i get a payslip that shows my gross wage, deductions for tax and ni and then my net wage. Isnt it the same for nannys? I pay a employers tax to hmrc every quarter.

Very few nanny jobs are eligible to be classed as self employed. So if you are employing a nanny, you need to pay their tax, just as in any other employer/employee situation.

Out nanny works just for us and I pay all her Tax. Your employer pays all your tax also

I pay income tax on my wages. Isnt that normal?

We paid all our nanny's tax. Have a chat with PAYEforNannies. I found them super helpful.

I think there may be some terminology confusion?

You pay income tax yes but on a practical level your employer actually pays it over to HMRC. You don't get it and then pay it. It comes out of your salary, but the mechanics are that your employer transfers it over.

Is that what she is referring to? You use a payroll company to pay her as an employee; so you pay her income tax to HMRC through that.

Yes this is confusing me

My nanny gets £11net per hour. A payroll company then calculate her NI and Tax for me and I pay this over every 3 months.

Are you saying you pay her gross eg £14 per hour and expect her to pay the tax etc as it’s a gross salary?

I was always told as an employer that we should pay a gross wage

I'm also confused. I'm a nanny, I am paid a gross wage, but my employer uses a payroll company who calculate tax, ni, pension from that gross wage, my employer then deducts that amount and pays me my net salary each month. It works the same as many other jobs.

As an employer you pay the Nanny a net wage.

So if she earns £14 gross - then you hold back whatever her income tax and NI come to (let's say £3) and pay her £11.

The £3 gets paid by you to HMRC for tax and NI.

You would only pay her gross if she was self-employed (in which case she would arrange paying her tax and NI).

You are her employer - yes you have agreed a gross wage correctly as then you know what your liability is but you need to deduct her income tax and NI and pay employers NI to HMRC. You need to pay her holiday pay and then ensure she has a workplace pension.

There are a number of companies such as NannyTax (google them) who do this for you and also give you standard employment docs such as a contract of employment.

Nannies are actually quite complicated if
They are not through an agency or self employed. Even self employed you need to be careful as they may not be genuinely self employed / saying that your nanny could well be if she has multiple families.

With an employee who has multiple jobs, you as employer should agree a gross salary. You then deduct Income Tax from that gross salary in accordance with instructions from HMRC (HMRC issue a tax code for the job which causes the PAYE system to deduct Income Tax).

Due to having multiple jobs your employee may or may not have any NI deducted from their gross pay. Class 1 National Insurance is deducted when the employees pay reaches the relevant threshold.

So you are quite right to agree a gross salary with your nanny, and to run PAYE and deduct whatever that system tells you to deduct. It is then up to your nanny to sort out with HMRC with regard to any tax allowances being split between jobs (if HMRC agree to a different split than that initially decided they will issue you with a tax coding notice, which the PAYE system then uses to recalculate the Income Tax to be deducted).

I thought employers paid a nanny a gross hourly rate.

They agree a gross wage. They physically pay the net wage (gross wage minus deductions).

My nanny is adamant she wants me to pay her tax and she just pays her own NI.

She cannot do that. It is not possible for her to pay Class 1 NI, that is a deduction from wages which the employer transfers to HMRC on the employees behalf.

Is she perhaps referring to some other class of NI? Not sure why she would be as Class 2 and Class 4 are for self employed people. Class 3 is a bit of an oddity and most people will probably never pay that.

Stick with what you are doing and refer her to your payroll provider if she does not understand that you have a legal duty to deduct Income Tax and Class 1 NI from her gross salary in accordance to the PAYE rules.

Thank you everyone, i thought i was going nuts. I think what has happened is that her other employers are choosing to add the tax paye figure back onto her net wage and so she thinks i should too.

her other employers are choosing to add the tax paye figure back onto her net wage

Not sure what you mean by that. More likely is that other employers have agreed to pay her a net salary... which is madness as the employers costs are then variable.

Just stick with how you are doing things, I can't see that you are doing anything wrong.

I know what you mean OP.
The nanny is confused between net and gross wage. She basically wants to be paid net what you want to pay her gross.

Agreeing a net wage is a very old school thing to do and EXTREMELY unwise particularly if the nanny has other gigs. However lots of employers naively do it and shamefully agencies don’t always deter it (although payroll firms like Nannytax do).