Confused about tax

[Jadefeather7]

Hi

I’m looking to take on a part time nanny for under 10 hours a week. In a couple of months she will start another role with longer hours (so they will be her main employer). Will I need to pay tax even though I will be paying her around £100 a week (so less than the lower earnings limit)? Thanks

Yes you will need to deduct income tax.

You need to register as an employer, get P45 off your nanny (if they have had any income since 6th April 2019) and then process PAYE. That way you are the main employer to start with. When your nanny starts their second job, they complete a New Starter Checklist/P46 ticking box C and then HMRC will issue new tax codes at some point.

You will have payroll admin cost. You won't have Employers NI cost. You will need to setup a pension scheme but won't need to auto-enrol your nanny, though they could opt in.

If you don't do all that then when your nanny takes on the other job I think you would then need to register as an employer. I would talk to a nanny payroll company and discuss the situation with them - before doing so, make sure you know what income your nanny has already had this tax year... are you their first job, or have they earned already and have a P45 from a job they have left?

Thanks!
When I use this calculator (say £108 net wage a week) it says the gross wage is £110. Is that really correct?

www.stafftax.co.uk/employers/salary-calculators/net-to-gross-salary-calculator#calculator

If your employee is only working 10 hours a week you won't need to set up a pension scheme as they won't be eligible for auto enrolment.

If she starts work for you before the other job there will be no tax payable on her wages as she'll be under the limits however once she starts the new job you may find that HMRC send a new tax code through for her.

The net wage will be the same as the gross wage as there will be no deductions for tax, NI or pensions but this may change once she starts the other job depending on the updates tax code.

Thanks. How do I found it if I need to pay tax once she starts the new job? I would like to know in advance if I will need to pay tax...

Do not agree Net. Agree a gross wage.

£100 x 52 = £5,200 annual salary, so it is way below personal tax allowance (typically £12,500) so when they start and it is their only income, then there is no difference between Net and Gross.
If it is their second job... then Income Tax is at 20%, so if your nanny insists on £100 take home, then you would need to pay £120 gross.

Agree a gross wage you are happy with, then whatever happens to tax code does not matter to you, your cost remains the same.

Thank you so much! She wants £12 an hour net and we are looking at 9 hours so that’s £108 net and £129.60 gross a week. For the first month or two before she starts her other job can I pay her £108 or would I need to pay the gross amount? Really appreciate your help with getting my head around this!

Agree a gross amount and always pay what is show as net on the payslip. The amount will vary depending on their individual tax situation.

If you are happy to agree £129.60 gross per week, £14.40 gross per hour, then stick with that. Initially your nanny will get more than their desired £12 net and once they are working the other job they will get roughly £12 net... so they should be happy but do need to realise that their pay can vary depending on their personal tax circumstances.

As you would be paying £129.60 gross per week, there is still no Employers NI and you are under the auto-enrolment threshold for pension. You do still need to have a pension scheme but you would not actually do anything with it - so you could initially run that yourself (setting up a Nest Pensions account and notifying The Pensions Regulator - 22 page form I seem to recall), or pay the admin fee the payroll provider charges if you don't want the hassle of that.

@nannynick if this is the only employee OP will have then there is no need to set up a pension scheme as the employee will not reach the auto enrolment threshold of earning £192 or more a week.

The employee may decide to opt-in. The scheme has to be ready to accept them.
Have you found a way around that? Maybe the scheme can be created when someone opts in but I think the pensions regulator requires it to be there.

www.thepensionsregulator.gov.uk/en/employers/new-employers/im-an-employer-who-doesnt-have-to-provide-a-pension-now

Employer still has to complete a declaration of compliance and that document needs a pension scheme reference. So the scheme has to exist. I can not see a way around that.

@nannynick OP would be completing the DoC to say that she does not have any employees to be automatically enrolled on the duties start date so won't be asked to input pension scheme details.

If the employee chooses to opt-in (unlikely as the contribution would be minimal & the employer wouldn't have to contribute) then its acceptable to create a scheme at this point - the DoC doesn't ask about opt-ins only auto enrolments so would still not require the pension scheme details.