Due to the increase in nannies wages and changes in the way parents return to work after having a baby, many families are finding it more cost effective to 'share' a nanny with another family. Essentially all this means is that your nanny has another job running concurrently with her employment with you. Normally this creates little or no concern to an employer however in the nanny industry things can be a little different.
Problems usually arise when nannies agree a net salary with each employer without either the nanny or employer considering fully the tax implications of the nanny having a second job.
In the UK an individual has a personal tax code (747L in tax year 2011-2012). This code means that they receive just over £7475 tax free each year via PAYE. After the tax free allowance is used up each week/month we then have a 20% band then 40%.
If a person has a second job however, the Income Tax in that second job starts at the 20% band leaving out the tax free allowance as it is assumed the primary employer will have already used it. For a second employer paying a net salary (i.e parent picks up the tax bill) this will mean one family pays a disproportionately higher tax bill than the other.
For example if you pay a nanny £200.00 per week net using a full tax free allowance you can expect taxes of around £45.87 per week in addition to the net wage. If you pay the same salary with no tax free allowance this increases the costs to £93.07 per week over a 50% increase.
The task that NannyPaye aims to help you with if finding a mid point that is fair for all employers involved. It's important to note that whatever is finally worked out, any allocation of a tax code other than 100% will mean that the taxes in addition to your nanny's pay will be higher than if she were only working for you.
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