Understanding Nanny Taxes – A Guide for Families
Bringing a nanny into your home can help provide support for your family’s childcare needs, allowing you to balance work and family responsibilities. However, it’s important to be aware of the legal and financial responsibilities that come with hiring a nanny. One crucial aspect is understanding and managing nanny taxes.
Keep reading for a breakdown of the essentials to help you navigate this aspect of domestic employment.
What are Nanny Taxes?
Nanny taxes refer to the set of tax and National Insurance (NI) contributions that need to be paid by both the employer (you) and the nanny. These obligations apply when you hire someone to provide childcare services in your home. The UK government treats nannies as employees, and as such, their income is subject to income tax and NI contributions, just like any other employee.
Employer Responsibilities
1. Register as an Employer
If you plan to pay your nanny £120 or more a week (as of the 2021-2022 tax year), you are legally required to register as an employer with HM Revenue and Customs (HMRC).
2. Calculate and Deduct Taxes
As the employer, you must calculate and deduct income tax and National Insurance contributions from your nanny’s gross salary. The exact amounts depend on the nanny’s earnings and tax code.
3. Provide Payslips
You are obligated to provide your nanny with payslips that detail their salary, deductions, and other necessary information.
4. Report to HMRC
Every tax year, you are required to submit a Full Payment Submission (FPS) to HMRC, providing details of your nanny’s earnings, deductions, and taxes.
5. Provide a P60
At the end of each tax year, you must give your nanny a P60 form, which outlines their total earnings and the taxes paid during the year.
Nanny Responsibilities
1. Pay Tax and NI
Nannies need to pay income tax and National Insurance contributions to HMRC. This ensures that they receive the appropriate state benefits and pension entitlements.
2. Keep Records
Nannies should keep accurate records of their earnings, payslips, and any other relevant documentation for their financial records.
Benefits of Compliance
Complying with nanny tax obligations benefits both you and your nanny. By fulfilling your responsibilities as an employer, you contribute to any pension benefits your nanny is entitled to and you help to ensure a transparent and professional relationship, fostering trust and a positive work environment.
Getting Help
Navigating the intricacies of taxes can be overwhelming, especially if you’re new to employing household staff. Seeking professional assistance from a payroll service such as Nannytax can alleviate the stress and ensure that you meet all legal requirements.
By fulfilling your obligations as an employer and supporting your nanny in meeting their responsibilities, you create a harmonious work arrangement that benefits all parties involved. Remember, complying not only ensures legal adherence but also contributes to a fair and respectful work environment.
