Will the National Insurance rise affect my nanny’s salary?
The National Insurance rise will reverse from 6th November 2022 – read our update here
With the new tax year on the horizon, many nanny employers are wondering how the National Insurance rise will affect their nanny’s salary from April 2022.
The National Insurance (NI) rise will apply to two parts of the salary, resulting in an increase on both the employee’s and the employer’s side of the NI contributions. However, it differs slightly depending on whether the nanny is on a Gross or Net salary agreement.
Quick Summary
Gross Salary Agreements
The NI increase will impact the Employer and Nanny equally by 1.25% each
• The employer will see a slight increase in their Employer NI contributions due to the 1.25% increase on their side of the Employer NI contributions.
• The nanny will see a slight decrease to their take home pay due to the 1.25% increase on their side of the Employee NI contributions.
Net Salary Agreements
The NI increase will impact the Employer by 2.5%
• The employer will be required to pay the 1.25% increase on the Employer NI and the 1.25% increase on the Employee NI.
• This is an example of one of the disadvantages of a net salary agreement as you cannot guarantee what the additional Tax and NI costs will be on top of a net salary – especially when tax and NI increases like this come into play.
• Although the NI increase won’t affect nannies on a net salary agreement, there are still many disadvantages for nannies on a net salary.
How much is the National Insurance increase?
Our Nannytax payroll experts have shared these NI increase examples for both a gross salary agreement and a net salary agreement to showcase how much the percentage increase equates to.
Gross Salary Example
For a nanny who earns £1500 gross per month, the nanny will pay an extra £5.34 per month (deducted from their ‘take home pay’) and the employer will pay an extra £6.38 per month.
Nanny earns £1500 Gross per Month…
How much is the National Insurance from April 2022?
Employee NI = £89.70 per month (this was £84.36 previously)
Employer NI = £111.67 per month (this was £105.29 previously)
Impact on Nanny per month
£89.70 – £84.36 = £5.34 decrease to ‘take home pay’
Impact on Nanny Employer per month
£111.67 – £105.29 = £6.38 increase
Net Salary Example
For a nanny who earns £1500 net per month, the employer will pay an extra £21.78 per month.
Nanny earns £1500 Net per month…
How much is the National Insurance from April 2022?
Employee NI = £125.43
Employer NI = £152.25
£125.43 + £152.25 = Total NI contributions for Employer to pay £277.68 per month (this was £255.90 previously)
Impact on Nanny Employer per month
£277.68 – £255.90 = £21.78 increase
Impact on Nanny
Although the NI increase will not impact a nanny on a Net salary agreement, there are several other risks for a nanny who agrees a net salary. Read ‘6 Reasons Why Nannies Should Agree a Gross Salary’.
How can Nannytax help?
As a Nannytax employer you don’t need to do anything – we will take care of implementing the new NI increase for you. You will see what the additional cost is on your first April 2022 payslip.
Not a Nannytax customer? Join Nannytax to save yourself time and hassle. We can supply monthly or weekly payslips for you and your nanny covering the tax and NI due to HMRC and the remaining net salary to pay to your nanny. With our Nannytax Plus service, we can make the monthly payments on your behalf so you have even less to worry about.
