Paying Your Tax and NI
All employees must make Tax and NI contributions, including temporary or part time employees. Employers, including domestic employers, legally have to make Tax and NI deductions from your wage and pay this to the government on your behalf.
How does it work?
- All employees in the UK are obliged to contribute financially to the state through Pay As You Earn (PAYE).
- Both Tax and National Insurance is deducted every time the employee is paid, throughout the year.
- The employer is responsible for making those deductions and paying what they have collected to HMRC on your behalf.
- The family or families you work for are responsible for operating a PAYE scheme for you.
- They deduct the Tax and National Insurance you owe from your gross earnings.
- They then pay this to HMRC on your behalf.
- Ensure you are registered under a PAYE scheme.
- Keep a record of your payslips every time they are released.
- Your payslips show will show how much Tax and NI you are paying to HMRC, as well as your tax code, pension contributions and your net (take home) pay.
Important: Never assume that your tax is automatically being paid, especially if you are not receiving regular payslips. Many nannies have fallen foul of this and have experienced difficulties as a result.
When tax is not paid
It is considered a criminal offence to not pay the correct amount of Tax and National Insurance. If caught, both your employer and you could face a series of penalties. These may include:
- Repayments of any unpaid Tax and NI to HMRC including interest
- Potential fines for lack of payments and also lack of RTI information
- Criminal investigation with a risk of prosecution and imprisonment
Cash in hand
While being paid 'cash in hand' may seem nice and easy in the short term, it can create long term difficulties for the following;
- Statuatory rights, including Sick Pay, Maternity Pay and Redundancy
- Applying for a mortgage or loan as lenders require proof of earnings. Often the last 6 payslips