You will find a lot of information on this section of Mumsnet about hiring nannies - from drawing up contracts, arranging payroll, interview questions and where to advertise.
Advertise Online:
www.gumtree.com - pick your local Gumtree, cost varies, in some areas there is no charge.
NannyJob.co.uk - they currently charge £20.
By advertising on both Gumtree and NannyJob, various other job listing sites may pick up your advert - for example ClickAJob.
Have a good look around at existing jobs being listed on the websites, to give you an idea of how to write an advert. Personally I prefer jobs which state the salary. I know some employers don't want to put that initially, but I feel it helps. So you may want to think about that. If you do indicate salary, make sure you put if it is Gross or Net. Would suggest putting both if possible, with a statement saying that Net is based on a typical single person's tax code when they have only one job.
Agencies can be worth registering with, as you may get various other candidates... but you may also get the SAME candidates. With agencies you don't tend to pay until you actually hire someone - put the amount charged can be huge. Perhaps contact a few local agencies and ask for an information pack... see what they offer, how much they charge.