MrAnchovy’s PAYE Calculator – Alternatives

UPDATE 14/Nov/13 – MrAnchovy’s PAYE Calculator is back online.

Over the past couple of years MrAnchovy’s PAYE Calculator has been a useful tool for nannies and parents to use as it did a reverse tax calculation – that is, it did Net to Gross.

It came to my attention this week that MrAnchovy’s PAYE Calculator has gone offline.  This means that nannies and parents are looking for an alternative, of which there are many, though none in my view are quite as easy to use.

Having looked at a few, I would suggest the use of the following:

iPhone App – Tax Tool 2013   This will do a Net to Gross calculation.  It does not do Employers NI, so this app is useful to find the likely gross amount for a given Net pay.

UK Tax Calculators Reverse PAYE  This is a website which will do a Net to Gross calculation.  It only has the option of entering in the monthly Net amount.

Listen to Taxman  This PAYE calculator has been around for many years and does a Gross to Net calculation, including calculating Employers NI.

As with all tax calculators the more information you give the better the result.   If you do not know your taxcode, look on your latest payslip.  If you don’t have that, then in 2013/14 tax year (April 2013 to end of March 2014) use 944L if it will be your only job.  If it will be your secondary job, use tax code BR.

Keep in mind that the nature of PAYE is such that these calculators will not be precise, so they must not be used for doing the actual payroll.  They are a good indicator of the likely figures and thus are useful in agreeing a Gross salary figure.

In April 2014 personal tax allowance goes up, so nannies on a Gross salary will see a small increase in their take home pay.  Cost to employer should stay the same though it will depend on if there is any change to Employers National Insurance.


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UK Budget 2013 – Does the new employment allowance apply to employing a nanny?

In the Budget there was an announcement about Employers NI relief – article from Telegraph.

One question parents who employ a nanny are asking is, will that deduction in Employer NI apply to them.

To be honest, I have no idea.  I do not think that anyone really knows yet as the fine details have not been published, if indeed the Government has looked at the fine details yet.

It is a relief for businesses.  Parents employing a nanny are not running a business, they are a small employer.  It is a difference.  A business is taxed on it’s profits.  An employer of a nanny just pays Employers NI and deducts Income Tax and Employee NI from their employee.

I suspect it will depend on how the Government words things… will it apply to all employers, or just businesses and charities?    We will have to wait for the fine details to be ironed out before we know if this Employer NI rebate will apply to all employers, or just some.


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How To Calculate The Cost Of A Nanny?

How much it costs to employ a nanny in the UK is something that is often asked on parenting forums like Mumsnet and Netmums.  I find myself often preparing cost calculations for parents, so today I will write about how I calculate the cost of a nanny.

Nannies Salary

Start off by picking a figure for the nannies salary.  This can be tricky to decide and will vary from one part of the country to another, even within the same town or city the salary that nannies are offered could vary quite a bit.   There are various factors which may affect the level of salary, such as how much experience is desired, if the nanny is expected to work unusual hours, varying shift patterns perhaps.

At the time of writing (February 2012) jobs are thin on the ground, so it is what I would term as being an Employers Market.  Employers can offer jobs at whatever salary they like and see who applies.  You may well be able to get a great nanny with lots of experience for less money than you could a couple of years ago, as people need jobs at the moment and it’s better being in a job than job hunting.   So an experienced nanny may take a job at a lower salary than usual, in the hope that salary increases over time, which is likely to happen though the increase may be quite small.

As job applicants may be expecting the salary to increase over time, take that into account when working out what salary to offer.  Work out your budget and offer a salary below your budget, so that you have room to increase the salary say after the initial probation period and at the end of the year.

Get a feel for what other jobs, nannying and non-nannying are paying in your local area.  There are many job sites on the internet which will give you a feel for salaries on offer.
Nannies I would say would typically be paid £7 to £13 gross per hour.  Less than £7 I would have thought would be quite rare as £6.08 is National Minimum Wage for someone aged 21 or over, so an experienced nanny I feel would be wanting more than NMW.   An inexperienced nanny in their first job however may be happy to accept a wage nearer to NMW, though if you would be happy having them care for your children would be dependent on your childcare requirements, age of children, and things like how much supervision you may be giving the nanny.

Employers National Insurance

Employing someone costs money.  The UK Government taxes income and requires contributions to be made towards National Insurance (introduced in 1911) which is for paying things like health care.    Find out more… Why do we pay National Insurance (BBC Newsbeat article)

The amount that employers pay to HMRC in terms of Employers National Insurance varies according to the salary being paid to the employee and according to the current rate set in the Budget.   PAYE calculators like MrAnchovy’s PAYE Calculator will calculate the Employers NI amount that would be due for a given salary.  These calculators can be very accurate but should not be used for payroll purposes – follow the procedures for operating payroll instead.   So using the PAYE calculator as a guide tool, we can see that if we paid a nanny £1500 Gross per month, in 2012/13 tax year, Employers NI would be £121 per month.

Activity Budget – Nanny Kitty

Caring for children will often involve taking them out to various places – toddler groups, singing groups, to the library, museums, castles, trips on a train etc.

These activities and outings cost money, so you need to decide how you want to pay for those things.   Do you want to reimburse each expenses individually or do you want to give a weeks budget and let your nanny decide how to spend that money on your children?

I would say that it is easier to give your nanny a set budget and let them manage that budget.   £5 per day may well work quite well if you have a couple of children, a bit more may be needed during school holiday periods.  A bit more may be needed if you have more children and as children get older as admission charges for under 3’s can sometimes be nil, whilst a 6 year old could be charged quite a lot.

So if you take £5 per day as a budget, you can calculate that out over a 1 year period.  The amount will vary depending how many days per week your nanny works.  Also you won’t need to include in the budget days your nanny is on holiday (5.6 weeks is minimum holiday entitlement in the UK).

A nanny working 4 days per week would be looking at a kitty / activities budget of £928 per year.


Will you be doing the payroll paperwork yourself or would you want some help with that?   There are various nanny payroll companies who will do a lot of the paperwork side of payroll for you and each company has varying charges.  I would say that £135 per year is typical of a charge for doing payroll for a nanny who is paid monthly.

Adding all these costs together can help give you a better idea of how much employing a nanny will cost you.   There are other costs that may also be involved, such as nannies travel whilst on duty, nannies food & drink whilst on duty, extra wear & tear at your home if you are comparing having a nanny to using care outside of your home such as a nursery or childminder.

Are there any costs you feel should be added in, which can be easily calculated?  Or are all the other likely costs too variable to be able to give a realistic general cost?

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Employing A Nanny For The First Time – Nanny Tax and Payroll

Great, you have decided that you want to employ a nanny.  Now what?  Well one thing you need to do is to register with HMRC (Inland Revenue) as an employer and learn how to run payroll – you nanny will want paying after all.

HMRC have produced a guide to paying someone for the first time P49 (PDF).  It is quite a large document, at the time of writing it is a 5.6MB but it is well worth reading as it tells you how to go about taking on a new employee and operating the first month’s payroll run (you can do weekly payroll, though I suggest paying someone monthly as less times you have to run the payroll!)

The Employers CD-ROM has been replaced by Basic PAYE Tools which can help perform payroll tasks for up to 9 employees.  For further information about the Basic PAYE Tools application, see the guide P49 and “What can Basic PAYE Tools do for me?” on the BusinessLink website.

You will need to register with HMRC as an employer, which can be done by phone or e-mail.  Details of how to do that and what information they need from you can be found at HMRC: Register as an employer.   HMRC staff may talk to you about Simplified PAYE.  Having had many on-line discussions with an accountant about payroll, I will tell you what he told me… don’t use simplified, use full PAYE. Simplified sounds easier but in reality it can be harder and nannies can be paid above the earnings amount permitted so a lot of nanny employers need to use full PAYE anyway.

If you struggle with maths, form filling, or simply don’t have the time to be doing your own payroll there are many companies out there who will do the payroll for you.   My boss has been usingPAYEforNannies for several years now and is perfectly happy with the service provided.  As the nanny I like it that payslips arrive in plenty of time.   If you will be using a payroll service, then before doing anything contact the payroll company and find out from them what they need you to do, such as registering with HMRC or if they handle everything for you.   Payroll companies charge around £120 a year typically for handling payroll for one nanny.    Some payroll companies will provide additional services, such as a legal advice phone line.  Consider if you really need that as the fees charged by the payroll company may be quite a bit higher than a payroll company which does not provide a legal advice line.  You may also find that you can get employment law and other legal advice via your home insurers advice line.

Has your employee (nanny) given you a P45?

If not, a P46 must be completed.

See P49 for details of how to get the starting tax code, from information provided on P46.   The P46 must be sent to HMRC on the first payday, this is now done on-line.   A lot of the payroll forms are now on-line based, so if you are not able to get good internet access then you may wish to consider using a payroll company to carry out the payroll function on your behalf.

The information from the P45 or the P46 will determine the starting tax code of your employee.  The guide talks you through this using a flow chart and if you get stuck you can call the new employer helpline.

When paying someone you need to work out how much income tax, employee national insurance and employers national insurance are due.  You must record this information each time you pay someone, using form P11 – you can do this using the PAYE Basic Tools.

You need to enter in the employees Gross pay for the period (so in the month, or week).  Then any statutory payments that may apply, such as Statutory Sick Pay.   Remember: Do Not Agree A NET Wage With Your Nanny.  Net wages belong way in the past, these days all employees are paid Gross and taxation is calculated from the Gross wage, so it can be very difficult for you to operate payroll yourself if agreeing a Net wage.  It is also like writing a blank cheque, as you never know how much it will cost you.

By law you must give your employee a payslip.  You need to include details of the Gross pay, employee national insurance contribution, amount of income tax deducted, any other deductions and the resulting net pay figure – the amount they get paid into their bank account.

You don’t need to include other information, though it can be helpful to include things like who the employer is and employer reference number.

As the employer you are deducting Employee Tax and Employee NICs from your nanny on behalf of HMRC.  You also have to pay Employers National Insurance.   The Employers NI, Employee Tax and Employee NI are then sent to HMRC once every three months – so keep the money safe in a savings account so you don’t spend it.

To get an idea of how much these deductions will be for a given Gross salary, use a UK PAYE calculator.

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