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Paid childcare

Discuss everything related to paid childcare here, including childminders, nannies, nurseries and au pairs.

gross vs net

13 replies

Idontgetit · 10/11/2008 22:18

Can anyone help please?
I recently started working for this family who agreed a net salary, and now are wanting to change it to a gross one. I don't know what the difference would be, I do about £180wk with them but I work an extra shift as a childminder (self-employed) which apparently is the reason why they are now wanting to change the settlement to gross plus they also want to know how much I get in my second job, I thought employment and self-employment had nothing to do with each other (taxes wise), as I'm totally responsible for the taxes I pay as self-employed (whereas my earnings are £1 or £100 on top of this job as employee) However this is the first time I would have both categories, so I'm not sure how am I suppose to deal with taxes this way
could anyone clear my mind pls

OP posts:
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nannynick · 10/11/2008 23:09

They should not have agreed a Net salary. They now need to regotiate the contract with Gross salary.
www.listentotaxman.com will help with calculations, but it is not easy to do Net to Gross. Will help if you know your taxcode being used.
Did you hand them a P45 or complete P46? That should have given them starting taxcode to use.

nannynick · 10/11/2008 23:13

Im on Mobile so limited in how much I can write.

You do not need to tell them how much you earn in other employments/Semployed. HMRC will issue a revised taxcode if they decide to do so.

Idontgetit · 11/11/2008 20:50

My contract states a net salary, but when I got the job offer, they gave me a gross as well as the net equivalent, and I have these sums on an e-mail, so roughly I do know how much this would be. They gave me both amounts as they thought I could work SE for them so they could offer more if that was the case, but not being that the case, we agreed on the net one. I also completed a P46, although I haven't got a clue about how this form differs from the P46, as I said before, I'm clueless regarding tax matters, last year was the first time I actually worked as SE, and I was way below the lowest tax bracket, so was granted a Certificate of low earnings for the last financial year, however, this year will be different and I don't know how taxes work when being both employed and SE, do they just add up as if it was an only job, or, in the case of still being earning just a little in my SE, would I be still qualifying for low earnings as SE regardless of whatever I get in this part-time job?, and how does my SE taxes affect my now Employer regarding how much they are supposed to pay for my tax, NI contributions and employers NI contributions.
If all this make sense!!

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hatwoman · 11/11/2008 21:15

idontget it - the reason they want to change is v. possibly because your s-e earnings will affect your total tax bill. which means that, having agreed a net salary, it will affect (or at least has the potential to affect) what they pay on your behalf to the tax man.

the key thing is your tax free allowance. I'm no expert but a bit of googling seems to indicate that when you have both s-e earnings and paye earnings you have some freedom to choose whether to use your tax-free allowance against your s-e earnings or against your paye earnings. If, then, you chose to use your tax free allowance for your s-e earnings your employer's tax bill would be higher - and possibly variable if your s-e earnings vary. So they just want the stability of a gross salary - that way they know what you cost, in total, every month. the impact of your s-e earnings and any decisions you make re your tax free allowance will, as far as they are concerned, only affect how they apportion what they pay (ie how much to you and how much to the tax man) but their total bill will be the same.

for you - it doesn't make a difference that part of your earnings are se and part paye. although it's a bit more complicated to get there you will have the same tax free allowance as anyone else, and pay the same rate of tax on any earnings abover that (regardless of where they come from). The important thing is to be sure that the gross salary really is equivalent to the net ou agreed. this works out gross equivalents but assumes no other earnings.

Idontgetit · 11/11/2008 21:45

Thanks, I understand a bit better now, what I still don't get is why would I need to tell them and even prove my earnings as SE

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nannynick · 11/11/2008 21:47

May be worth calling your local tax office and asking for their advice. You need to determine if you want your personal allowance used for your nanny job, or for your SEwork.
If you end up paying too much tax, it gets refunded eventually. If you pay too little, that's when problems can arise.

hatwoman · 11/11/2008 21:53

I didn;t see that bit of your first post - if they want to agree a gross salary then I can't think of a valid reason why they need to know your other earnings (but perhaps there is one). I agree with nannynick about calling your tax office. one thing I have found with slightly complicated situations is that if the first person doesn;t seem to "get" what your saying and asking, then just try again another time - you rarely get the same person twice and I;ve had both complete muppets and really helpful knowledgeable people in the same tax office...

nannynick · 11/11/2008 21:56

I don't get that either... why do they need to know how much you earn from other employments? That does not make sense to me. All I think they need to know is what tax code to use.

If you didn't have other income and thus all of your personal allowance was allocated to the nanny job, then if your Net weekly pay was £180, then I make your Gross Annual pay £10,945.50 So I would suggest to you that you renegotiate the contract such that you get as close as you can to £11,000 Gross per year, paid monthly. That way you will still be getting £180 net per week this current financial year. Next financial year things could change, you may get more, or less take home pay.

nannynick · 11/11/2008 21:59

Calculation provided by ListenToTaxman.com

nannynick · 11/11/2008 22:02

Is this your first nanny job? Is this the first time this family have employed a nanny?
If YES in both cases, you are both learning as you go along, so I feel you need to give each other a bit of a leeway. Your pay amount can be renegotiated between yourselves and I am sure you can come to some agreement on what Annual Gross Salary is applicable.

BoffinMum · 11/11/2008 22:05

It's a good idea to be paid gross because then you benefit from any tax cuts, rather than your employers.

I think it's a bit old fashioned to pay nannies net and I have never done this. They are professionals and as such should be paid like them - monthly and gross.

Idontgetit · 11/11/2008 22:10

Thanks to both for your advice, this is indeed my first nanny job and they do not seem to have had someone else before, so as you say we're learning, so far they seem to be a lovely family, I think we'll come to a fair agreement.
Thnx!

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nannynick · 11/11/2008 22:17

When you completed the P46, did you tick Box C - I have another job or receive a state or
occupational pension.

I suspect you may have done so, thus putting you on BR tax code for your nanny job. This may then have come as a shock to your employer who was expecting your tax code to be 603L or similar.
This wouldn't be an issue if they had agreed a Gross wage with you, as they would make deductions as per BR, until such time as advised by HMRC to use a different taxcode.
As they may have agreed a Net wage with you (I'm still unclear as to exactly what they have agreed with you, as you say in one e-mail there was Net and Gross figures), with BR code they would be paying you the agreed NET amount and paying employees tax at BR rate on your behalf, which is higher than if it were 603L.
At BR rate it seems to me to push your Gross salary up to £12,695 calculations
There would also be a knock on effect for Employers NI. Thus I can see why your employer wants to get this all sorted out.

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