What You Really Need To Know About Nanny Tax
If you are considering hiring a nanny to care for your children then there are a few important considerations about nanny tax which you need to take into account. Read on to find out more.
When it comes to hiring a nanny one of the most important considerations will be the expense. Whilst having a nanny may seem like the best solution to your childcare needs, if you cannot meet the monthly expense it is an option which quickly becomes invalid. You would be forgiven for initially thinking that the weekly expense quoted in most of the articles and advice you find about nanny hire represents the amount of money you need to budget for. In fact, most of the information out there discusses net wage and fails to mention that as the parent of the child you also have to pay tax on top of the usual quoted figure. So what do you need to know about this nanny tax?
• What you need to pay – When you hire a full-time nanny you will need to pay the following:
1. National Insurance Contributions
2. Income tax
3. An Employer’s National Insurance Contribution
• When to pay – If your nanny is earning over £97 per week you have a legal obligation to pay national insurance contributions, income tax and an employer’s national insurance contribution. You must set up and operate a PAYE scheme, keep a payroll, produce yearly accounts of all payments and declare your nanny’s wage to the Inland Revenue.
• What happens if you don’t pay – As paying nanny tax and national insurance contributions is a legal requirement, you are breaking the law if you fail to do so. The consequence of not paying nanny tax may be a hefty fine.
• How to go about paying – The first step to sorting out your nanny tax is to register as an employer at the tax office. Then many people choose to hire the services of a specialist payroll service to sort out the PAYE scheme, national insurance contributions and also provide them with invaluable employment advice. These specialist companies make the whole process less painful for the employer.