Moneybox
September 1998
My new employer is a first-time employer. What should she do about my tax?
Your new employer should be clear that it is by law her responsibility to account accurately for your tax and National Insurance to the Inland Revenue within a fixed timescale. Failure to do so can result in heavy penalties and additional interest payments. She must register with the Inland Revenue as an employer and her tax office will send her a PAYE (Pay as You Earn) Starter Pack. Some employers use an accountant or payroll service, others work it all out themselves. Either way there are a few key issues to understand:
- How much your employment will cost. There is a difference between your net (take-home) pay and your gross wage (which includes your income tax and NI deductions). Your employer will also have to pay an Employer's NI Contribution based on your gross wage. Better to be clear about this at the outset than get a nasty shock later!
- Your employer (or her payroll agent) must provide payslips for you (showing your gross wage, tax and NI deductions for a given week or month), a P45 when you leave showing your earnings and tax contributions to date and a P60 (giving total earnings, tax and NI contributions in a tax year) at each tax year-end. You may need these for your records when dealing with the tax system (i.e. for self-assessment if you have other sources of income) and in your personal financial arrangements (e.g. as proof of earnings if you apply for a mortgage or a loan).
- How and when will she pay you? This will be by agreement - weekly or monthly, by cash, cheque or standing order. Your employer will also pay over your tax and NI to the Inland Revenue every quarter.
- She must provide you with a contract which includes all the terms and conditions of your employment.
Nannies work for private individuals who have often had no previous experience of employing someone. If you have worked as a nanny before you could be very helpful to your employer by pointing her in the right direction, giving her relevant information and generally helping her fulfil her statutory obligations both to the Inland Revenue and to you – her employee.