Nannysharing made easy

The concept of sharing a nanny between two or more families is becoming increasingly common, with approximately 17% of all Nannytax clients currently in a share. This figure has been rising steadily in the last few years, and we expect the trend to continue as nannysharing provides an affordable solution to the childcare dilemma and fits in nicely with the growing emphasis on work-life balance.

What is a nannyshare?
A nannyshare is where two (or more) families employ the same nanny and agree to share the overall cost proportionately. Although it isn’t necessary for the families to know each other, some communication between them is advisable; in fact lack of communication is one of the main reasons it can sometimes take a long time to set up a share or why they sometimes fail altogether.

When friends share a nanny
In situations where both employers are friends, it is possible for only one family (family A) to register as an employer and pay tax and NI, with the other family (family B) paying their share directly to family A. However, this is not advisable partly because in the event of any disagreements, family A would have to cover all costs; and also because registering as one employer actually ends up costing more in NI contributions.

Saving money by sharing a nanny
If only family A registers they must pay NI contributions on nanny’s salary above £105 a week. If both families share the cost, they both benefit from the £105-a-week exemption, so less of the nanny’s salary is subject to NI contributions. The joint saving can be as much as £1,500.00 per year.

How does it work?
Technically only one family (family A) will be classed as the main employer, which means they will receive the full benefit of the nanny’s tax-free allowance, leaving family B having to pay tax at basic rate (20%). But in practice what happens is that the nannyshare team at Nannytax calculate the joint total cost (and if a net-pay agreement has been made Nannytax works out the gross equivalent, which protects both families’ costs going forward).

Who pays what?
In a share family A will be paying proportionately more of nanny’s salary and less to HMRC; family B on the other hand, will pay less of nanny’s salary, but more to HMRC. This arrangement ensures that nanny is being correctly taxed, and both families are paying the accurate amount. It doesn’t matter if nanny works more hours for one family.

Agree a gross and protect your total cost
Nannytax recommends that all pay arrangements are made on a gross basis, since any employer agreeing a net pay is in effect agreeing to pay for any tax and/or NI increases or any underpayment from previous employment. But in a nannyshare it’s particularly important that both families agree a gross pay. A gross pay agreement will automatically protect the total cost, and so it doesn’t matter if the families fall out or if the current share dissolves. With a gross wage agreement there is no need to share the total cost. Finally a gross wage agreement also means that the communication between families A and B can be kept to a minimum.

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