Should she pay the nanny tax?

[lumpasmelly]

I'm curious....my friend has just employed a nanny for one day a week, and apparently she doesn't pay her tax or NI. The nanny works 44 hours for another family who DO pay the tax and NI, so the nanny does not want to "complicate things" by splitting the tax code. Also, according to my friend, since she is paying less than the £105 per week this is under the government threshold. I'm confused as I thought you needed to do the whole nanny tax thing regardless...even if you have a nanny for a few hours a week? What's the deal with this threshold, or is she just making it up to cover up for the fact that she is in fact doing a sneaky "cash in hand" deal!

She's covering up a sneaky cash in hand arrangement.

Well as far as NI goes she is under the limit, so there is no additional cost to the employer, other than the administrative cost.

But in terms of tax, there would be PAYE whic sould be deducted from the nanny's pay and handed over to the IR. There is no need to split the tax code - your friend would just deduct basic rate tax.

They do, she is using her tax free allowence with the other employer so everything she earns with your friend is eligablefor tax and NI, most likely t the basic rate.

I agree it sounds like they are doing a cash in hand deal (although I don't know if ti is the nanny or your friend)

In case I wasn't clear, the only person benefiting financially is the nanny herself (unless of course your friend ended up negotiating a lower salary on the basis that the nanny was receiving it tax-free).

I thought that the £105 a week limit was to do with how much the nanny earnt (all jobs added together) not how much one job pays.
She doesn't need to split the tax code, she needs to pay tax on the whole amount she pays the nanny - does your friend realise that the employer is the one who gets fined (about £3000 ) etc if the inland revenue find out!

Well that's what I was thinking....this friend is actually a bit ditsy so I am not sure if she actually realises the ramifications of what she is doing. But at the same time I don't want to wade in there with a big "STOP - YOU ARE BREAKING THE LAW2 lecture until I know the facts. She's usually so "moral" so I must admit I was surprised when she divulged this to me.

The £105 limit also applies for NI though - and that limit is for each job. Income tax is for the total, so yes all tax free allowance is presumably used up by the first family.

I suppose it's a bit a bummer to be the "last family" as you're stung with a bigger tax bill, but no excuse for breaking the law....it's nannies like this that make it difficult for the rest of us who pay through the nose to do things properly (i.e. do it all legally through the books) as we can't afford to pay so much!!!...and also the families that let it happen. I will have a word!

Most nannies wages are agreed net for some reason, in a case like this where it is a second job it is in the employers interest to agree a gross wage that takes into account the costs.

LS you are not stung by being the last family, you should agree a gross wage and then deduct the PAYE to be paid over to HMRC

its possible the other family wont share the tax code, and if the nanny agreed to a nett wage, they dont have to share

your friend is doigna sneaky cih - she will be the one fined £3000 if tax people find out, esp if she pays in cheques or direct debit and can be traced, rather than cash

I am in the same situation, I employ a nanny for 4 hours a week and she has another job the other 4 days. Her first employer has all the tax free allowance and therefore her pay from me is subject to basic rate tax on the whole amount - but no NI as that is per employment and well below the threshold.
I agreed a salary at the same GROSS level as the first employment - that way I am not losing out. (and neither is the nanny - total tax bill would be exactly the same regardless of how the personal allowance is split).

I spoke to Ofsted who said I can stay on the register as a nanny/homecarer but said I needed to talk to the inland revenue regarding staying self employed. I have spoken to the inland revenue today and they confirmed you can be self employed as a nanny or registered homecarer providing you are looking after children from more than one address (ie a nanny for more than one family). You can not be self employed working for one family.

I enquired about this as I am a childminder at present and due to my hubbie now working nights I no longer want to childmind from my own home.

I have been asked to nanny for a local family but would like to also nanny for one of my existing mindees in her own home, who has been with me for nearly two years since she was a baby.

This suits all of us fine as it saves all the confusion with the families splitting tax/NI and I will invoice each family monthly as I do at the moment except all the care will take place in their homes and not mine and I will pay my own tax/NI as I do now. So it can be done but only under these circumstances.

Sorry I read the thread wrong! Sounds like she is doing a crafty with the 2nd family cash in hand. However some people might be interested to know that their is a way of nanny sharing whilst paying your own tax/NI.

I think I'll go to bed now, it's late and I'm confusing the issue!!

like everyone said - she should definitely be paying tax. whether or not you call it the second/last family getting "stung" the reality is, as this nanny has presumably realised, that if she wants xx net in her pocket the gross equivalent is huge because they don't get any of the tax free allowance. The gross amount is way beyond what most people can afford/are willing to pay for a nanny. so it's hard for nannies to get a second/one day a week job.

but I don;t have sympathy...we all get a much reduced net hourly/daily wage the more hours we do. it's just how it is.

the sooner nannies and their employers stop thinking in net terms the better.