Help for Nannies

At NannyMatters we want to ensure that your pay and tax are always correct, so we are happy to help you sort out any problems. Even if you are not currently a NannyMatters nanny, we are happy to give you free advice. If you are as impressed with us as we think you'll be, you might introduce us to your current or next employer. That's how we've grown our business.

Nannies often suffer from complications with their tax, for various reasons, such as:

  • Parents making calculation errors or not providing forms
  • Two or more part-time and / or temporary roles
  • Agency work.

Often the complications are not the nanny's fault, but she can still be faced with unpaid tax.

Many nannies believe that their employer is wholly responsible for calculating and paying over the correct amount of income tax on their behalf. However, if an underpayment occurs, HM Revenue and Customs will normally expect you to repay the amount due, not your employer, since you are the taxpayer.

Top Tips for nannies

Once you understand that your tax is, ultimately, your responsibility, you can prevent most problems occurring. Here are our Top Tips on paying the right amount of tax:

  • Make sure you get a payslip. You are entitled to receive a payslip each pay day that shows the pay and tax deducted.
  • Check your payslips. If you have more than one employer, check only one is using the code 647L. Every other employer must be using the tax code BR.
  • Be very wary of casual, cash-in-hand agreements. In law, ALL your income counts for tax purposes. In these agreements, the parent may be breaking the law by paying the wages tax-free, but you may also be breaking the law by not declaring the income.
  • Keep your employer(s) informed about changes in your circumstances and make sure they hold your correct National Insurance number.
  • When you discuss pay, agree a gross hourly rate instead of a net. Under a gross pay agreement, you receive your hourly rate less tax and NI, so you know who is using your tax code because it is reflected in your net pay. Net pay agreements DO NOT protect you from income tax underpayments.
  • Don't sign forms that you do not understand.
  • Don't agree to a tax code split without seeking your own, independent advice.
  • Always ask your employer to use NannyMatters or another reputable company to calculate your pay.

So how much tax should you pay?

The ‘magic’ number is £124. The first £124 you earn (in total, from all employments) is tax-free. Everything you earn after that is subject to tax, currently at 20%. Higher earners pay tax at 40% on earnings above about £44,000pa (and top earners pay at 50%). The calculation can be complicated, but you can get free advice and illustrations from NannyMatters, or click here for the Tax and NI Costs table.

What if you have two employers?

If you have two employers, and agree a net (take-home) pay with both, the main employer will normally hold your tax code and this means he or she gets to pay that first £124 tax-free. The second employer has to pay Basic Rate tax, which means every pound they give you is subject to 20% tax. Not surprisingly, many second employers balk at the cost and expect the tax to be shared more fairly between the two employments.

You can get around this by asking HMRC to share your 647L tax code between your employers. Better still, you can avoid the problem altogether by agreeing a gross hourly rate (less tax and NI) instead. A gross pay agreement is generally better for both you and your employer.

Please call for advice about your particular situation, or to request the helpsheets listed below.

Further information

Please feel free to call Alison Hull at NannyMatters on 01275 464425 or send an email to alison@nannymatters.co.uk to request any of the following helpsheets:

  • Gross v Net Pay Agreements (which is better?)
  • How to split your tax code
  • When a nanny takes a second job
  • Nanny-shares
  • Paying Income Tax