You must have heard of the nanny tax in the UK. This does not only refer to the submission of tax returns in case you are working as a self-employed nanny or a childminder. If you are a parent or a guardian who is in search of a nanny or a childminder to take care of your children, you will have to consider the liabilities that will come to you for hiring a nanny from HMRC.
The tax is something associated with this process that you can not simply deny this responsibility for. However, you do not need to worry as this guide will help you to know about the tax implications whether you are a nanny or you aim to hire one for the responsibility of your children.
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Nanny Tax for the Childminders as Self-employed Nanny
If you are working as a self-employed nanny, you will be liable to declare what you are earning from this job to HMRC. This will be possible while you are working to submit your tax returns. As we all know that the process of filing tax returns happens once a tax year.
31st January is the deadline considered to submit the tax returns. You will have to make the declaration of your month of April from the 6th date to the 5th of April. If you are wondering about the tax amount that you owe to HMRC, this purely depends upon the amount of money you are earning in a month.
Moreover, it is generally considered that you will have to pay two mandatory taxes as a self-employed nanny. These include income tax and national insurance.
What will happen if I Do Not File Tax Returns?
This will be easier to understand if you have an idea of the personal allowance at first. Personal allowance refers to the portion of your earnings that is tax-free. If an individual is earning less than a certain period of a tax year, there will be an entitlement to a full personal allowance.
If you are making an amount that is less than £12,570 in a tax year, you will not pay any income tax for this earning. However, you will still pay the national insurance. Also, the need to file the tax returns is still intact even if you are earning is than £12,570.
Moreover, this process is done to HMRC informed about the amount of income you are earning in a tax year. Also, the source of income is to be declared for the factor of transparency. You can only avoid filing tax returns when your income is less than even the amount of £1,000 in a year.
The Nanny Tax and Guardians
If you are a guardian or a parent who is looking for a nanny to take care of your children, you will have to consider the employment status of your nanny. Whether they are full-time workers or doing this job as a part-time activity. Some of them are even maintaining a full-time job along with working as a nanny.
This part is really important to consider before you choose to hire a nanny for your children. The fact that you will be in the role of an employer of the nanny and the income they are making can make you liable for tax payments. A few things that you will have to consider you hire your nanny to include the following:
- PAYE tax
- Workplace pension
- Redundancy
- Maternity pay
- Statutory sick pay
- Holiday pay
The Employment Status of A Nanny – How Do I know?
Get the decision to start working together, you must determine and identify the exact employment status of your nanny. You must know whether your nanny is self-employed or an employed childminder. Wondering how to identify the employment status of the nanny before finalising the process?
In some cases, the nanny works for you once or twice a week and has the option to decline the work whenever unavailable. In this case, the employment status of your nanny is self-employment. On the other hand, if your nanny works for 40 hours a week that is a full-time job or 20 hours a week which is a part-time job. In such a case you have the responsibility to handle how to do the work and what are the working hours. The off days will be requested from you before they avail it. This is a nanny who is working with the employment status of being employed by you.
The Bottom Line
Now that you have gathered a fair amount of information about the nanny tax, we can say that it is imperative to know the employment status nanny before you choose to hire them because you will end up paying more tax being in the role of an employer. In the role of a nanny or a childminder, you will have to consider your tax implications or you will have to struggle with the hefty fines issued by HMRC.
If you seek professional help to learn more about nanny tax. Why wander somewhere else when you have our young and clever team of professionals at Accotax?
Disclaimer: The information provided in this blog about nanny tax, including the text and graphics, in general. It does not intend to disregard any of the professional advice.
