Nannies and car allowances
Most nannies are expected to have a driving licence as driving the children to and from school and to after-school activities is often part of her job description. If you provide the nanny with the use of a car and she only uses the vehicle during working hours it is not considered a taxable benefit. However, if she is permitted to take the car home and use it as a means to get to and from work, then it is considered a benefit in kind and must be declared as such. There could also be an additional benefit if the employer pays for all fuel, including fuel used for private use.
If you use Nannytax we will establish the value of this benefit and complete a P11-D form on your behalf. If you wish you can ask the nanny to contribute towards the cost of running the car and whatever her contribution is will be deducted from the value of the benefit and thereby reduce the tax that has to be paid.*
If the nanny uses her own car during working hours the normal remuneration is 45p per mile (above that it is considered a taxable benefit and must be declared as such). The 45p is to cover fuel as well as wear and tear of the vehicle.
In both cases it is important that all receipts are kept in a safe place, because the reimbursement of petrol costs may be perceived as a discrepancy in the nanny’s salary and may appear suspicious in the eyes of HMRC.
As an employer you must also make sure your nanny is covered on the insurance policy of the vehicle. Most domestic insurance policies cover you, and named drivers, for social, domestic and pleasure purposes only. It is therefore important to find out whether your motor insurer includes nanny activities within this definition.
The nanny must also ensure that she has the correct motor insurance cover to use her car for business use, and she should contact her motor insurance provider and arrange for this to be added to her policy.
*Please note that the tax due on benefits in kind is deducted from the gross salary together with income tax. Providing you have a gross-wage agreement with the nanny this will not affect your total cost. If you have a net-wage agreement with your nanny you have to pay this tax on top of the income tax, which means that your total cost will be increased.