Congratulations on landing a great nanny job! You’ll get to bond with a new family and plan lots of playtime—and of course there’s the small matter of payday to look forward to. While you ponder what you might spend your salary on, it’s good to know exactly where you stand with the taxman.
One of the big advantages of nannying is that you’re employed by the family you work for. That means you’ll be signed up for a Pay As You Earn (PAYE) scheme, so your tax and National Insurance (NI) contributions are taken care of automatically. You are also protected by all the other rights that come with being an employee, such as paid holiday, sick pay, maternity/paternity benefits and the minimum wage.
Before you sign on the dotted line
Make sure you’re clear about the agreed terms and salary, and check your contract carefully! If you’re unsure about anything, now is the time to ask.
It’s a legal requirement for your employer to provide you with a written statement of employment particulars. This includes details of how much and how often you will be paid.
You’ll need to give your employer details including your NI number so that they can set up the payroll. You’ll also need to provide them with the P45 form from your last job.
How will I be paid?
You may be paid weekly or monthly, depending on what you and your employer agree. Your employer can pay you in cash, as long as they take off the right amount of tax and NI and pass this on to HMRC. These days, however, most people are paid by bank transfer, meaning you don’t have to carry large sums of money around and there is a clear paper trail.
What will be deducted from my salary?
It’s one of the great disappointments in life that your headline (gross) salary doesn’t look quite as juicy by the time it reaches you:
- Income tax is deducted from everything you earn above a certain amount, known as your personal allowance—currently £12,570. You pay 20% (the basic rate) on the next chunk of income. Let’s see how this works:
If you earn £25,000 a year, you will pay nothing on the first £12,570 and 20% on the next £12,430, which puts your tax at £2,486.
Someone on £15,000 a year will only pay tax on £2,430 of their income, which works out at just £486.
High earners pay higher rates on subsequent chunks of their income.
Note that income tax bands are different if you live in Scotland. - Class 1 NI contributions are deducted from employees’ earnings over £242 a week.
So if you earn £500 a week, you’ll pay 12% on £258, or £30.96.
Even if you earn less (between £123 and £242 a week), though, you will still be treated as having contributed. This is important because paying NI qualifies you for your state pension.
- If you’re over 22 and earning at least £10,000 a year, your employer must enrol you in a workplace pension. You and your employer both pay into the pension. Your employer must contribute at least 3% of your salary over a certain amount, and your combined contributions must add up to at least 8%.
- Your employer may also give you extra perks like paying for your gym membership, Ofsted registration or mobile phone contract. You have to pay tax on some, but not all, of these benefits in kind. Talk to your employer about how this will work.
Where can I check all these figures?
Working in childcare, we know that little accidents can happen. That’s why you need to be able to check that you have been paid correctly and all the right deductions have been made.
Your first port of call is your payslip, which you should receive on or by each payday. It shows your gross and net salary and lists everything that has been deducted. After the end of each tax year, you will receive a P60, which provides a summary for the full year. You might also get an annual form P11D if you received certain benefits in kind.
These are important legal documents and you must hang on to them—particularly if you ever need to claim back overpaid tax, apply for tax credits or take out a mortgage.
Anything else to bear in mind?
Don’t forget to tell your employer and HMRC if you move house. And of course, try not to spend it all at once!