Government introduces new tax and NI structures
We will se some dramatic changes to the tax system from April 6th this year, when the 10% tax band is eliminated and the 22% basic rate tax is reduced to 20%. The Treasury is also introducing changes to the National Insurance contributions at the same time (due to be scaled alongside income tax bands over the next two years).
Nannytax have done some preliminary calculations to give you a rough idea of how salaries will be affected.
Nannies on gross pay arrangements
- Nannies earning up to £114 per week will be slightly better off than they currently are, but this will only be by a few pence
- Nannies earning between £115 and £290 per week will be worse off than they currently are. This will peak at around £145 (per week) where the nanny will be about £2.92 worse off per week (about £152 per year)
- Nannies earning from £291 and up will be better off. This will peak at around £670 (per week) where the nanny will be about £7.58 better off per week (about £394 per year)
- Nannies earning £770 (per week) and more will be better off, but only by about 30p
If the nanny is on a gross pay her employer will always be slightly better off than they are now, but only by a few pennies.
Nannies on net pay arrangements
Nannies who are on a net wage agreement will obviously not experience a difference in their pay (by agreeing a net pay the employer effectively agrees to pay the tax and NI whatever it is); however, in some cases it will be noticed by the employer:
- The employer will be slightly better off than now if the nanny is earning up to £115 per week
- The employer will be worse off if the nanny is on a salary between £116 and £219. This will peak at around £138 where the employer will be about £4.01 worse off per week (approximately £208.50 per year)
- The employer will be better off if they’re paying their nanny £220 and over. This will peak at around £480 where the employer will be £12.76 per week, or £663.52 per year, better off. After that it will start to taper off again
Please note that these calculations are for guideline purposes only.