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Tax and National Insurance

Your main legal rights as an employee are :

  • Your entitlement to a contract from your employer spelling out the terms and conditions of your employment
  • Your right to receive regular payslips.

However, bear in mind that, if being an employee is a new experience for you, then being an employer may well be a new experience for the parents you are working for. But if you are well-informed, you could even help your employers to understand and fulfil their legal obligations to both you and the Inland Revenue.

In fact, nannies should try to be more aware of their legal rights and entitlements than the average new employees of a business or other organisations, because compared to these their employers will usually know far less about their obligations under the PAYE (Pay As You Earn) tax system. And if your employers are foreign, perhaps working for an international company, then they will be even less familiar with how employment works in the UK.

Self-employed or employed?

With few exceptions (these being maternity nurses and some nannies in continuous temporary employment), if you work as a nanny it is your employer's responsibility to register with the Inland Revenue as an employer, to deduct tax and National Insurance (NI) contributions, on your behalf, from your gross wage, and pay these every quarter to the Inland Revenue, along with an additional employer's NI contribution (which is part of their total cost but not part of your gross wage). Your employer is also required by law to provide you with payslips each week or month showing tax and NI deductions made from your gross wage to arrive at your net wage, as well as a form P60 (if you are with them at the end of a tax year - 5 April) which summarises your annual earnings and total tax and NI deductions.

If your employers tell you to take care of your own tax or ask you to be self-employed, you must refuse and insist that it is their responsibility. To be self-employed you have to be accepted and registered as such by your local tax office, and (with the

above exceptions) nannies simply do not meet the Inland Revenue's criteria for self-employment. Having two or even three part-time jobs does not make any difference in this respect.

Get It In Writing

Once your wages and conditions have been agreed, make sure you receive a contract, or at the very least a letter of appointment, before you start work (or a contract within 13 weeks of starting work). This should clearly spell out (among other things) your agreed salary (specifying whether net or gross) and your employers' acceptance of their responsibility to withhold, and pay over, tax and NI contributions to the Inland Revenue on your behalf. If an employer fails to meet their responsibilities, having your own copy of their agreement to do so, in writing, is your greatest protection. The standard FRES contract for nanny employment, widely used by nanny agencies will give you and your employer an idea of the issues and details which should be included in a contract.

Net Pay or Gross?

You may have been quoted a net wage (ie: what you will actually receive) by your nanny agency or employer. However, whether you have been quoted net or gross, it is important to understand that in reality you are always being paid a gross wage. It is advantageous to both you and your employer to agree a gross wage (or at least to establish in your contract that your salary consists of a net wage plus tax and NI contributions on your behalf from an equivalent gross wage). One of the main advantages is that if tax rates are cut, as they were this April, you automatically get the benefit, rather than getting the benefit (or not) at your employer's discretion.

What Happens if Your Employer doesn't pay your tax?

If you are not sure whether your employer is paying your tax and NI, make some enquiries. Ask your employer for details of their tax office and (unique) PAYE scheme number. If they don't have a PAYE scheme they can't be paying your tax! If you've recently started working for them and they haven't employed before they may be in the process of setting up a scheme.

Category: Insurance

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