Paying nanny gross salary AND taxes

[user1474261826]

Help! My husband and I just realised that we have been paying our nanny her gross salary to her bank account each week, without taking out taxes, and then paying the taxes to HMRC on top of it. We miscommunicated and divided up the work on the actual payment of the nanny and then the communication with Nannytax/HMRC. This has been happening for 18 months. We have always felt like our taxes were incredibly high, but just realised we haven't been deducting the taxes from her pay. We also thought she had been getting her payslips directly from Nannytax, but are now realising that's also not the case. Can we ask for money back from the past 18 months of double paying -- or are we out of luck? We love our nanny but we cannot continue wrongly paying this amount and are worried she will leave once the taxes are properly taken out as well.

That is really frustrating. But really you are both at fault here. You should have been checking the pay slip and she should have been too. I can't believe she hasn't asked to see a pay slip for 18 months. I always check mine and twice my boss has paid me the gross wage and I end up texting her straight away and then the following month she just pays me less.
18 months is such a lot for her to owe you though. Can you speak to your payroll provider to see what they suggest? I feel like legally the money is yours? But someone can correct me if I'm wrong.

The payroll company my families use send an email every month with the pay slip to the family and clearly state 'please arrange for the net pay to reach your nanny's account by the agreed date' so if they have done that then it wont be their fault either.

P.s can you explain further what you meant about calculated the hours ?
Just so we can see what you mean a bit better

Oof. Asking for that amount of money back is going to be hard, and you can't reasonably ask for it back as a lump sum, you'd have to offer a payment plan. But I'd expect her to fight quite hard to keep the money - it isn't really her fault, and since you've overpaid from day one there wasn't a sudden jump that she should have brought up with you.

Speaking as someone in an industry where payroll often get it wrong, the official policy for dealing with over-payment (it happens that often) is that the person who was over paid has to pay it back and agree to a payment plan. However they don't have to pay it back as a lump sum (payroll often insist but are wrong) and can set back the rate they pay it back at (eg a £1 a month payment plan - is paying it back).
I don't know if this applies to nannying, but its certainly how it is in my world.

Also from your nanny's point of view, she's about to face a huge paycut - from having to pay the tax from now on, she probably won't be able to afford much of a payment plan.

I think you need to have a realistic conversation with her, acknowledge that this is your mistake not hers and see what happens. Be prepared for her to walk away.

Ask nannytax to provide your nanny with online access to payslips going forward from now. They may be able to give access that method of payslips for this financial year (so back to April), they may be able to go further back but if not ask for them to printed off as a PDF and emailed to you/your nanny. NannyTax (or any payroll provider) will have ways that they can provide copies of the past payslips, electronic is often the easiest.

I agree about nanny repaying the money, lump sum would not be appropriate. A repayment plan of some sort could work. It could be several £thousand involved so may take a long time to repay. What if they leave the job, would you demand payment? 18 months is a long time for it to be happening so it's not a small amount involved so hard for all involved.

Is this your first nanny ?

Yes you are at fault but so is the nanny. The first month she got paid she should have queried it -

Trust me she will know what she earns

Assume you have gross amount written in contract

Not sure how nannytax got the payslips wrong if you said gross amount a hour /day is .....

I think you’ve got to start by asking her for the money back and agreeing a payment plan...

To add to your problems, if she doesn’t pay you back then you haven’t paid enough tax in respect of her earnings because you calculated tax based on her net salary but you’ve paid her gross. So you’ll have underpaid employer and employee NICs and PAYE income tax. So you’d owe HMRC more tax. Plus interest. Potentially plus penalties particularly if they catch you before you tell them.

So if she doesn’t agree to pay you back pretty promptly I’d consider opting in to see your local tax accountant or solicitor to get some advice either on getting the money back from her or on your own compliance position.

Yup. Accountant needed to unwind this.

Not sure about the financial aspect. But would assume you will lose the nanny if you now alter (decrease) her salary and ask for the money back. It isn't likely to end on good terms.

To be honest I think you as employers are at fault. She may have noticed an over payment if it had been different from previous months or a one off larger sum, but this has been going on for the whole duration of her employment, 18m. I think it's a bit late now to chase your money back when you continuously made payment error.