Nannyshares are when two or more families employ the same nanny to either care for all children at the same time, or split the week between them. It isn't necessary for the families to know each other, although good communication between them will make the arrangement much easier.
Nannyshares and Nannytax
We deal with nannyshares daily and have a dedicated and experienced nannyshare team who can navigate the complexities of splitting costs and making sure each family pays the correct liabilities to HMRC. It is important for both families to be registered as employers and both must pay the National Minimum wage, despite being part of a nannyshare.
The infamous 'Tax Code Split'
This is where the nanny's tax-free allowance is split between employers, to avoid either employer paying basic rate tax on all of the nanny's earnings from them. As long as both employers agree a gross salary with the nanny, a tax code split is not really necessary as their Total Costs will be protected. Together both employers will be paying the correct amount of tax overall on the nanny's behalf.
However, some nannyshare clients like to split the nanny's tax code so the allowance is fair and we are happy to do this if it is preferred. Due to new HMRC ruling called Dynamic Tax coding, the nanny’s tax code will be calculated based on how much the employee has earned already during the tax year, how much the employee is predicted to earn, and then the remaining will be split between employers. Therefore, regrettably we are unable to provide accurate salary calculations for nanny shares until HMRC has allocated a tax code for the nanny in their new job.
If an employee works 10 hours for one family and 30 hours for another, each employer should receive a fair portion of the Tax-free allowance:
The 10-hour family will receive 25% of the remaining Tax-free allowance.
The 30-hour family will receive 75% of the remaining Tax-free allowance.
However, please note that the nanny can choose how much they wish to allocate to each employer.
Additional things to think about
Salary - Both families need to be registered as employers, and each agree to pay the National Minimum Wage or above. Agreeing a gross salary with your nanny will help avoid any unexpected cost involved which may occur due to a nannyshare.
Contract - Each family should have a separate contract with the nanny so that they can continue the relationship should the other family drop out. Nannytax HR can ensure you have the right contract in place, help with any negotiations and provide a Nannyshare Agreement between you and the family you are sharing the nanny with.
Holidays - Talk to the other family and the nanny about holidays — a common solution is for each family to decide on one week and the nanny to decide on two weeks. See holiday entitlement page for guidance on calculating holidays.
Rules & Standards - If the children of two or more families are being cared for at the same time, rules and standards will have to be agreed between the families and the nanny up front. It is worth having a Nannyshare Agreement to address this.
Clients are advised to contact us for guidance if an employee wishes to split their tax code.