How will the 2018 Tax Year changes affect me?
The new Tax Year comes into effect from 6 April 2018 and there are three main changes happening that will affect nannies and employers.
1. The Tax Free Allowance will rise to £11,850 (£228 gross per week)
The personal allowance – the amount people earn before they start paying income Tax – will rise from £11,500 to £11,850.
This means that nannies on a gross salary agreement will see an increase in their take-home pay (net) and employers will see a decrease in their HMRC bill.
Nannies who are part of Nannyshare agreement and have split Tax codes will have the same percentage of their Tax code, split between the families as they currently have. The amount that goes into their bank account will only change if they are on a gross salary agreement. Nannies on a net agreement will have the same take-home pay. However, employer's HMRC bill will change.
2. The National Insurance threshold will rise to £8,424 (£162 gross per week)
Both employers and employee’s National Insurance thresholds will be increasing from £8,112 to £8,424.
The same as with the Tax Free Allowance, this means that nannies on a gross salary agreement will see an increase in their take-home pay. Nannies on net agreement will not have any change to their take-home pay. Employers will see a slight decrease in their HMRC bill.
3. Pension contributions are increasing to a total of 5%
The pension contribution percentages will be increasing for employers, employees, and the government as from 6 April. This will also happen in the following Tax Year. The percentage contribution does not have to be paid on the whole salary. It can be paid on something called 'Qualifying Earnings'. For more information about Qualifying Earnings click here.
|Present until 5th April||1%||0.8%||0.2%||2%|
|6th April 2018 - 5th April 2019||2%||2.4%||0.6%||5%|
|6th April 2019 - onwards||3%||4%||1%||8%|
Check the payslips before paying your nanny
We recommend that all employers check their employee’s payslips for the new net salary and change any Standing Order accordingly. If you have any questions you can always contact us.
For more information about gross vs net please click here.
For more information about the new rates and thresholds please click here.