arrow_upward arrow_upward
Nannytax | Why shouldn’t I pay my nanny cash-in-hand?

Why shouldn’t I pay my nanny cash-in-hand?

For less than £1 a day, keep yourself compliant with Nannytax

When you employ a nanny, you become responsible for lots of different things, such as providing your nanny with an employment contract, administering statutory pay, your nanny’s salary, nanny payroll, providing payslips, and being compliant with HMRC. Paying your nanny via a nanny PAYE scheme, rather than paying your nanny cash-in-hand, will help you keep yourself compliant with HMRC, and there are quite a few other reasons as to why you shouldn’t pay your nanny cash-in-hand. 

Let’s talk about them.

Reporting to HMRC

Paying your nanny cash-in-hand is not necessarily illegal, but it can be if you do not declare the payments to HMRC. It is a legal requirement to report your nanny’s earnings to HMRC if they are earning above the lower earnings limit (£120 a week), and this is easier to do when your nanny is in a nanny PAYE scheme. If your nanny is earning below the lower earnings limit but they have another job or other source of income, their earnings will still need to be reported to HMRC, even if it’s just £10 a week. If you don’t report the earnings, you will be fined.

Do I need to declare all of my nanny’s salary to HMRC?

“It is really important that employers declare all of their employees’ earnings to HMRC as failure to do this can result in charges and penalties on top of their liability. It’s important that what you pay to your employee matches the net pay on the payslip. An example of why this is so important is if an employee is applying for a mortgage, they will need to provide payslips along with a bank statement that shows their net pay being paid into their bank account.” – Phoebe Cornish, Nannytax Payroller

Benefits for your employee

If your nanny is not being paid through a nanny PAYE scheme and they have no payslips, there is no way of them receiving the benefits that they are entitled to. These benefits include their pension, Statutory Sick Pay, Statutory Maternity Pay, etc. Not to mention, without access to payslips, your nanny will not be able to take out a mortgage should she/he wish.

Underpayment of tax

Your nanny can receive an underpayment of tax letter from HMRC if they have not paid enough tax. This payment will either need to be made in one lump sum to HMRC, or their tax code will be reduced in the following tax year. By paying your nanny via a nanny PAYE scheme looked after by a nanny payroll bureau, like Nannytax, you ensure your nanny won’t receive one of these letters

Keeping a positive working relationship

In the unlikely instance where a nanny is self-employed and has this status granted by HMRC, you should still not pay your nanny cash-in-hand. This is because it is very difficult to keep record of cash payments and if either you or your nanny are not honest, this could lead to disputes which may negatively impact your working relationship.

Keeping yourself compliant with HMRC and meeting all of your employer responsibilities can feel daunting, but for less than £1 a day, you can keep yourself compliant with Nannytax!

We offer an end-to-end nanny PAYE service that encompasses nanny payroll and we are here to make employing a nanny easy for you. To find out more about our services, click here or call us on 020 3137 4401 and a member of our friendly team of nanny payroll experts will be happy to talk to you!

You might also be interested in…