According to the laws in the UK, you’re an employer when you hire a nanny. Along with this status, you’ll be held to some responsibilities. One of these is to manage payroll records for the nanny. Literally, this means that you’ll submit pay figures to the HMRC each payday and make the appropriate deductions from their pay.
Tax Rules and Regulations
Many nannies will offer to pay their own taxes and the National Insurance. Sadly, in 99 percent of these cases, it’s not an option. Per HMRC, this type of work is considered to be employment, not self-employment. HMRC takes the stand to hold you, the employer, responsible for the payment of the taxes, looking at nanny payroll is a great guide to keep you on top of expenses and regulations. Regardless of the circumstances that your nanny is in elsewhere, you, by law, are required to make the quarterly tax and payments to NI.
It’s important to understand that employment means that you need to pay out the National Insurance. Other payments that are given to a self-employed person don’t require this. This means that the taxman will lose out when the employer treats and employee as self-employed. For this reason, the rules are very strict on the matter.
Caution! The employer and the individuals may have to repay any HMRC taxes as well as any penalties and they could potentially lose their entitlement to the benefits that they’ve earned if the employment status isn’t listed correctly.
Employment Status Tool
On rare occasions, a true case of self-employment may exist. A good example is a nanny that specialises in settling a newborn in and thus they go from one job to the next.
If this might be the case, then it’s important to use the employment status indicator tool that the HMRC website has to determine the actual status of the nanny. The tool on the website is anonymous and gives useful information on the different statuses of employment.
A self-employed nanny will often, but not every time, be paid per job, an employee will receive an hourly rate or a salary.
If you need a positive answer, you can check the tool on their website: www.hmrc.gov.uk/calcs/esi.htm.
The nanny may already be paying taxes and be registered as well as National Insurance via the Self-Assessment. If this is the case and she is self-employed as a childminder in her own home or for a separate business that’s unrelated, it doesn’t mean that you have to go with self-employment. It only means that she has more than one source of income.
It’s also possible that she has considered her income from other jobs as a nanny as self-employment. If the other employers didn’t make deductions, she will have to declare the income via the self-assessment or she’ll be in non-compliance. This won’t change her position with all of her employers if they are already paying out the tax and the NI.
It’s important to consider mentioning the implications of employment status so that everyone understands. Employees are entitled to paid leave on an annual basis as well as pensions, sick pay, statutory maternity, and of course, statutory redundancy pay if they have more than one employer. Self-employed people have no entitlements to the law at all.