Category: HMRC

Nanny and Private use of Car

If you have provided nanny with private use of a car, you need to inform HMRC straightaway. The quickest way is to complete a form P46 car

By notifying them straightaway, they will reduce nanny’s tax code the month she is given the car.

Failure to tell them when she has the car, will mean her tax code will be coded incorrectly causing an under payment.

Even though you have notified HMRC of the car via a P46 car, you will need to complete a P11d and pay Class 1A National Insurance on the benefit amount.

Please see link below

www.gov.uk/tell-hmrc-company-car

30 Hours Free Childcare

The criteria for 30 hours for funded childcare, is that you must earn £131.36 a week which equates to 16 hours at the national minimum wage or Living Wage.

The 30 hours a week is for 38 weeks of the year and is for children who are aged 3 or 4 this equates to 1,140 hours per year.

You will not be able to claim this, if you or your partner has a taxable income of over £100,000, the child does not usually live with you, if the child is fostered or if you are from outside the EEA and it states you can’t access public funds on your UK residence card.

To register for funded childcare or for more questions:

https://www.childcarechoices.gov.uk/

RTI Real Time Information

RTI stands for Real Time Information and was introduced by HMRC in 2012. HMRC put this system into place so that every time an employee is paid, it is the employer’s responsibility to make a submission to them detailing this payment.

By employers using RTI, it enables HMRC to process any amendments to employee’s tax free allowance in real time rather than as done previously on previous years records and pass this information to Department for Work and Pensions. In turn this makes sure Universal Tax Credit claims are based on accurate figures of an employee’s income.

As an employer, if your payroll submission is not sent to HMRC on time, £100 fines will be issued. It is important as an employer to make sure all pay details are sent to HMRC on or before the date nanny is paid.

Live in Nannies

There has been a rise in live-in nannies, and with that confusion over nanny’s legal pay.

If nanny lives in the family home, is treated as part of the family – eating most meals with them and spending time together such as leisure activities and evening time in the same sitting room, then the national minimum wage does not apply.

The national minimum wage will come into effect for nanny’s who are not treated as part of the family, but instead the employer will be able to use the offset allowance when the nanny is live-in by £7.55 a day, £52.85 for a whole week.

The other scenario is that nanny is given accommodation separate to that of the family, this then becomes a benefit in kind and needs to be declared annually to HMRC.

If there is a benefit in kind, it will mean nanny’s tax code will be decreased and her net pay goes down and as an employer having to pay an additional national insurance on the benefit amount.

The law is very strict, so you need to make sure you know how to proceed with your live in nanny.

Understanding Tax Codes

Your tax code determines the amount of tax you pay each pay period and for current tax year the standard tax code is 1250L.

Whatever your tax code the numbers denote the amount you can earn each year before you are liable to pay tax, you just need to add a zero to the end of code and this then means the 1250 code gives you a figure of £12,500 you can earn before you pay tax.

This amount is then split into the number of pay periods you will have in the tax year, 52 if weekly and 12 if monthly.

Weekly £12500/52 = £240.38

Monthly £12500/12 = £1041.67

Once you have reached the above earnings in each pay period you then pay tax at 20%.

If you’re annual earnings are above £50,001.00 then the tax rate increases to 40% on earnings above this.

If you have several jobs it could well be that one of your employers has the full allowance (£12,500.00) and the other is using a tax code of BR, BR denotes that all earnings in that employee pay tax at 20% as the full allowance is being used elsewhere.

Should both employers have the full tax code, you will then need to contact HMRC directly (0300 200 3300) to get one of these corrected, you will need your NI number to hand when contacting them.

Christmas Bonus

It is that time of year, you may want to give nanny a Christmas bonus, but remember it must be processed through the payroll!

As HMRC class this as taxable income.

If you have decided to give nanny a Christmas bonus, whether it be £50 or £1,000, you must declare it and it is subject to tax and NI.

If you have agreed a net bonus, there will be additional tax and national insurance on top of this amount. Whereas, if you have agreed a gross bonus, (please don’t give them that amount), as tax and national insurance will need to be deducted from that and you then pay nanny the net amount.

A gift such as a voucher, chocolates, wine will not be seen as a benefit in kind as long as it does not exceed £50.00.

Payroll Terms

These are some of the most common terms used in payroll.

Gross pay – this is the pay before deductions for tax, national insurance, pension and student loans. The gross pay includes overtime, commission, bonuses, statutory payments and any other taxable income.

Net Pay – This is what nanny takes home in her pocket.

Tax – Deducted based on nanny’s tax code which determines nanny’s tax free allowance and then any earnings above the tax free allowance is deducted at 20%.

NI – National Insurance. There are 3 types of NI for PAYE.

Employees NI deducted from nanny’s gross wage at 12% on earnings above £166.00 per week.

Employer’s NI on top of nanny’s gross wage paid at 13.8% on earnings above £166.00 per week.

Class 1A NICS, this is a yearly payment for any benefits in kind nanny may have had for the previous tax year.

SMP – statutory maternity pay. Nanny is entitled to 39 paid weeks of leave providing she meets the criteria. Nanny is allowed a further 13 weeks unpaid

SPP – statutory paternity pay. Nanny entitled to 2 weeks of statutory pay.

SSP – statutory sick pay. Nanny will get SSP after 4 consecutive working days of sickness

P60 – Nanny will be given this form at the end of the tax year to show her annual pay, tax, NI and statutory payments, she then keeps this for her own records.

P45 – When nanny leaves your employment, a P45 will be issued with her leaving date, tax code, if a student loan has been deducted and total gross and tax to date in that tax year, she then gives this form to her next employer.

Qualifying Criteria for the Work Place Pension

Whether or not your nanny qualifies for the work place pension depends principally on your nanny’s age and their earnings.  The new law requires every employer to automatically enrol workers into a work place pension scheme if they are aged between 22 and the State Pension Age, and earn over £10,000.00 per annum.

If nanny is automatically enrolled in a pension, they can opt-out up to 30 days after the initial set up has been completed and get a refund on the amounts which have been deducted from their salary. They must complete and return an opt-out form and inform their pension provider.

If your nanny does not qualify to be automatically enrolled they still have the right to join a work place pension. This is known as a Non-eligible job holder.

Non-eligible job holder is an employee who doesn’t have to be automatically enrolled into a work place pension, but can ask to be joined into a pension scheme if so wish. If they do, both the employer and the nanny will have to pay into the pension pot each month.

The minimum auto enrolment contribution rates are currently 8% of qualifying earnings.  This is split between 3% which must be paid by the employer and 5% which must be paid by the employee.

Tax Free Childcare and Childcare Vouchers

Childcare vouchers will cease from the 5th October 2018 and thereafter the Tax-Free Childcare scheme will take over.

​You can get up to £500 every 3 months (£2,000 a year) for each of your children to help with the costs of childcare.

​​If you get Tax-Free Childcare, the government will pay £2 for every £8 you pay your childcare provider via an online account.

https://www.gov.uk/help-with-childcare-costs/tax-free-childcare​

You can get Tax-Free Childcare if you and your partner (if applicable) are –

​​in employment or getting parental leave, sick leave or annual leave

each earning at least the National Minimum Wage or Living Wage for 16 hours a week – this is £131.36 if you’re 25 or over​

​This earnings limit does not apply if you’re self-employed and started your business less than 12 months ago.

​Your child must be 11 or under and usually live with you. They stop being eligible on 1 September after their 11th birthday.

​​Adopted children are eligible, but foster children are not.

​​If your child is disabled, you may get up to £4,000 a year until they’re 17. They’re eligible for this if they –

​​get Disability Living Allowance, Personal Independence Payment or Armed Forces Independence Payment

are registered as blind or severely sight-impaired

​You’re not eligible if either you or your partner has a taxable income over £100,000.

​Your childcare provider must be signed up to the scheme before you can pay them and benefit from Tax-Free Childcare.

SMP Statutory Maternity Pay

All nannies are entitled to take up to 1 year off for maternity leave whether paid or unpaid.

How much SMP does employee get?

Of the 1-year entitlement nanny only gets paid for the first 39 weeks and should she take further 13 weeks off these are unpaid.

1st 6 weeks are paid at 90% of employee’s gross salary.

Remaining 33 weeks are paid at £148.68 or the 90% figure whichever is the lower amount.

Qualification for SMP

Nanny needs to have been employed by you 41 weeks before her due date.

Nanny needs to be earning above the lower earnings limit £118.00 gross per week.

Nanny needs to still be in your employ 15 weeks before her due date.

Processing SMP

Nanny will be issued form MATB1 from her Doctor or Midwife this form will have the due date and from this due date you can then determine whether she qualifies for SMP or not, if not you then need to issue nanny with form SMP1, so she can then claim maternity allowance directly from the state.

Cost of SMP

Small employers can usually claim back 103% of any SMP, this is 100% of the SMP itself and an additional 3% compensation to help towards cost of employers NI.