When you employ a nanny in the UK you need to deduct from the nannies pay Employee Income Tax and Employee National Insurance (NI). As the employer you also have to pay HMRC a tax called Employers National Insurance.
If you are considering employing a nanny it can be useful to get a feel for what these costs are likely to be over the next financial year. 2012/13 financial year starts in April 2012 and PAYE Calculators have been updated to include calculation of the new tax and NI amounts. These calculators should not be used for day-to-day payroll, as for that you should follow the procedure set out by HMRC but the tax/ni calculators do give very good figures for what you are likely to pay.
My preferred tax and NI calculator was written by an accountant towards the end of 2009. That accountant posts on various internet forums including Mumsnet and thus uses his forum username as it’s title: MrAnchovy’s PAYE Calculator 2o12/13
MrAnchovy’s PAYE Calculator is my preferred nanny tax and NI calculator due to it’s ability to do Gross to Net and Net to Gross calculations. It also has a simple to use interface, though it does need to be used on a modern browser and does not support usage on a mobile browser.
The tax calculator is just a single webpage which has different coloured boxes. You enter in details in Blue boxes and click the calculate button and the page will update to show the values in the Grey and White boxes. It enables you to specify: Tax Code, Days worked per week, Hours worked per week, if the nanny has a student loan, either the Gross or Net hourly/weekly/monthly/annual salary.
The tax calculator will start with some defaults… tax code of 810L for example, which is a typical single person’s tax code for 2012/13 financial year. Your nanny however may not have this tax code, so until you know your nannies tax code (this is established via a P45 or P46, plus coding notices from HMRC) it is wise to run the calculator twice… once with 810L and once with code BR. BR is the code used to not allocate any personal tax allowance to the job… thus all income is taxed. That will most likely be the situation if your nanny is part time and already has another job, as their primary job would be using their personal tax allowance.
Another PAYE Calculator is ListenToTaxman which I used before I heard about MrAnchovy’s tax and NI calculator.
Take a look and see which nanny tax calculator you prefer.
For more information about income tax and national insurance and employers obligation to operate PAYE, see the PAYE section of the HMRC website.
There are nanny payroll companies that can help you with producing payslips for your nanny and telling you when and how much to pay to HMRC. My own payslips for over 3 years have been produced by PAYEforNannies, so do take a look at that company.