How to pay your nanny and taxes due?

How to pay your nanny and taxes due?

Paying your nanny properly and efficiently is far simpler than you think. It takes a little groundwork but once you've set it up, it takes just minutes each month.

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Setting up to run payroll for your nanny can sound like a daunting task but doesn't have to be. For the most part, if you are hiring a a single person to work in your household, then you just need to follow specific steps and to be disciplined with how you run the payroll, pay your nanny on time and for expenses (if applicable) and to ensure you keep a record of all details.

It's important to note that paying for your nanny is different from using the childcare vouchers scheme or using the tax-free childcare allowance of £2000 per year per child (up to £4000 if the child has a disability). Of course, if your nanny is registered under the tax free childcare scheme as an authorised provider, then you can pay your nanny using the scheme.

What is the difference of paying my nanny directly or paying the company that hires our nanny?

Usually the difference is that the company is likely to be a registered childminder and approved by Ofsted making the payment eligible for a payment from the tax free childcare account that you have set up. If your nanny doesn't want the overhead deduction (a bit like how temp agencies take a cut from the salary temps earn) you can ask your nanny to get setup and registered. This is also a good test to see if your nanny has the correct credentials and has the right to work in the UK, which as an employer you should be one of your first checks.

Since when did I become an employer? As soon as you agreed to pay your nanny to provide childcare for you.

Lets get started

First you need to evaluate which of the schemes are open to you, if any, before you setup your PAYE account and choose software, and register on the Government Gateway. This might be the hardest part as there are a lot of criteria to look into. Companies such as Koru Kids may help elucidate the number of options available. You can also check the government website directly here. It's very important that you make a note of which scheme you can use and what is applicable to you.

1. Setup a PAYE account & government gateway account

Once you've decided on how to pay your nanny, and what schemes are available, you can register for PAYE. Once you have followed the steps, it could take up to 40 days to get activated but usually it only takes several weeks.

Due to the verification involving actual mail sent to your address, you will not be able to complete the setup of your account until after you get the confirmation codes in the post.

2. Set up an account with ShiftAI

Create your account on ShiftAI and ensure you complete all the organisation settings, and payroll settings details. Once you have done so, then add your childminder as an employee. Check to see if you qualify for small employers allowance and/or the employment allowance here.

3. Run payroll

Run the payroll and add your childminder/nanny/employee to the payroll run. Ensure you choose the correct payment date (that is the day you are actually paying the person) and the correct payroll period. If you are paying your nanny from your childcare account, you will need to fund that account. If you are not eligible for any of the schemes and you are paying your nanny directly (please check your eligibility criteria as many scenarios are eligible), then you would pay your nanny from your account on the payment date.

4. Check your PAYE account

Wait until the 10th day of the month after and check your PAYE account to see if you have to make any payment. You will know if you have to make a payment because there would have been income tax, employee NI or employer NI on the payroll that you ran. If you qualify for the Employment Allowance (which you wouldn't normally if there is only one person to pay) - and you selected it in payroll settings BEFORE running the payroll, then the bill might already be credited.

Make any payment that is due before the 19th of the month, otherwise you may be charged a late penalty and interest.

Closing your PAYE account

Running payroll becomes a monthly task once you are registered, even if you do not make any payment. If no payment is made, then you need to submit a 0 payroll. Hence, if PAYE is no longer needed, you can simply click on 'tick final PAYE' and 'PAYE scheme ceased' and submit the final payroll.

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