- Nanny and household staff employers have the same legal responsibilities as commercial employers.
- If a nanny or household staff employee earns over the Tax and NI thresholds, the employer must deduct these from her gross salary and pay these to HMRC on her behalf.
- NI Contributions go towards state pension and statutory entitlements such as SMP, SSP and unemployment benefits.
- Payslips are proof of earnings, required in order to apply for a bank loan or mortgage.
2017/2018 Tax and National Insurance Thresholds
These thresholds will be coming into effect as of 06/04/2017.
|Lower Earnings Limit
||£113 gross per week or less
||If you pay your employee the LEL or below, there is nothing due to HMRC and your employee will not be entitled to any state pensions or benefits.
|Bracket between Lower Earnings Limit and NI Threshold
||Between £113-£157 gross per week
||If you pay your employee between these figures there is nothing due to HMRC, however you should still register so your employee will be entitled to state pension and benefits.
|Employer's (Secondary) NI Threshold
||£157 gross per week or more
||If you pay your employee £157 or more you must register and pay Employer’s NI.
|Employee's (Primary) NI Threshold
||£157 gross per week or more
||If you pay your employee £157 or more you must now deduct National Insurance on behalf of your employee, as well as pay Employer’s NI.
||Over £221 gross per week
||If you pay your employee £221 or more you must now also deduct tax on from your employee.
Tax and NI Payments
|If your Tax and NI bill is below £1500 per month you only have to pay the Tax and NI to HMRC on a quarterly basis. Be aware that late payments can result in hefty fines and interest being applied.
|If your monthly liability bill exceeds £1500 per month you must pay HMRC every month.
National Minimum Wage (NMW)
*The National Minimum Wage (under 24) changes every October, the National Living Wage (25+) changes every April.
||£4.05 per hour gross
||£5.60 per hour gross
||£7.05 per hour gross
||£7.50 per hour gross
Redundancy Pay Entitlement
||Half a week's pay or £244.50, whichever is lower
||One week's pay or £489, whichever is lower
||One and half week's pay or £733.50, whichever is lower
|Nannytax clients are advised to call our offices for further assistance on accurately calculating Redundancy Pay.
Statutory Maternity Pay (SMP)
|The first 6 weeks of SMP are paid at 90% of average gross weekly earnings. The remaining weeks of the maternity pay period (up to a maximum of 33 weeks) are paid at the rate of £140.98 gross per week, or 90% of average gross weekly earnings, whichever is lower.
Statutory Sick Pay (SSP)
|£89.35 gross per week
||From 6 April 2014 recovery of SSP has been abolished. For a limited period you may be able to recover SSP for previous tax years. Nannytax clients are advised to call our offices if affected by the changes to SSP.
Student Loan Recovery
|£341 gross per week (Plan 1)
||If your employee has a student loan and they are earning £17,775 gross per year (£1,481 gross per month, £341 gross per week) or more, student loan repayments must be deducted from their salary.
|$403 gross per week (Plan 2)
||If your employee has a student loan and they are earning £21,000 gross per year (£1,750 gross per month, £403 gross per week) or more, student loan repayments must be deducted from their salary.
||Student loan deductions
A summary of responsibilities – the employer must:
Register as an employer with HMRC if:
- The nanny, household staff employee is paid £113 or more per week (tax year 2017/20178, assuming it is the only job and the employee is on a standard tax code
- The employee has more than 1 job, and the total earnings (from all jobs) exceed the current Tax and National Insurance thresholds, even if the employee earns below £113 per week in each job.
NB: If the employee's total weekly earnings are lower than £113 per week, the employer is not obliged to register with HMRC.
- Set up a PAYE (Pay As You Earn) scheme and make regular Tax and National Insurance payments to HMRC by their payment deadlines.
- Keep tax records.
- Provide the employee with a payslip or an itemised pay statement each time she is paid.
- Provide the employee with a contract of employment or written statement of the main terms of employment within 2 months of the job start date.
- File a year-end return by HMRC’s annual deadline.
- Have Employer’s Liability Insurance with cover of at least £5 million.
- Pay at least the National Minimum Wage. The current NMW rate for age 25+, is £7.50 gross per hour
- Provide a safe system and environment of work.
- Abide by employment law and be aware of statutory rights, such as holiday entitlement, Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) and redundancy, to name but a few.
- Ensure they are employing legally by making the necessary identity document checks. (Right to Work)
- The government has also legislated that over the next few years, all UK employers will be responsible for setting up and contributing to their nanny’s pension scheme. They will also be required to deduct a percentage from their nanny’s gross salary and contribute that into the pension scheme.
These employer responsibilities apply even for short periods of employment, and to all employment taking place in the UK, regardless of the country of origin of the domestic employee or employer. It is a criminal offence for an employer to not declare an employee to avoid paying tax.
For more information visit www.nannytax.co.uk or www.stafftax.co.uk.