Tips for Parents Considering Childcare Services
Are you wondering about the cost of childcare? When you hire childcare services to look after your children, you step into the role of an employer. As an employer, certain responsibilities come into play, including tax and national insurance contributions, along with providing a pension plan for your nanny.
Here’s a breakdown of the key factors to consider when calculating the associated expenses:
- Recruitment Costs (if using our service)
- Gross Nanny Salary
- Additional Responsibilities
- Employee’s National Insurance & Tax Contributions
- Pension Plan (Employer Contribution, minimum of 3% of monthly salary, subject to change)
- Employer’s Liability Insurance
- Ensure compliance with legal obligations and make necessary payroll filings with HM Revenue & Customs (HMRC)
- Other Expenses (if applicable): Nanny’s travel expenses, relevant medical and travel insurance, provision of meals unless otherwise agreed in the Employment Contract, and for live-in positions, insurance coverage for the nanny’s property and belongings throughout their employment. Additionally, car insurance and parking permits may be necessary.
If you’re considering a nanny share arrangement, it’s important to note that both sets of parents are considered employers. While costs can be shared, legal obligations remain the same for each employer. Each family employing the nanny is responsible for fulfilling individual responsibilities, even if all the children are cared for simultaneously. Simplifying matters becomes easier if one family decides to leave the shared arrangement.
Please keep in mind that, for the well-being of your children, it is not advisable for a nanny to care for more than three children under the age of three years or four children aged three years or older simultaneously.
Childcare Support Options for Parents
Parents who employ a nanny registered with Ofsted can access financial assistance to help cover their childcare expenses. There are two primary forms of financial support: employer-supported childcare vouchers and working tax credits.
If a parent requests that their nanny become Ofsted registered, especially if it results in financial benefits, it’s increasingly common for parents to cover some or all of the Ofsted registration costs. When parents do cover this registration fee, it’s considered a “benefit in kind” and must be reported accordingly.
Both working tax credits and childcare vouchers can be used to offset the expenses associated with hiring an Ofsted registered nanny, including shared nannies. Families with a combined annual income of less than £66,000 can currently receive up to 90% of the costs of employing an Ofsted registered nanny through tax credits.
To utilize childcare vouchers, you must meet these criteria:
- Employ an Ofsted registered nanny.
- Be employed yourself.
- Your employer must establish and administer a childcare voucher scheme.
Please note that self-employed individuals currently cannot benefit from childcare vouchers. However, if you’re a company director, you can access them as long as you make them available to all your employees.
When both parents use childcare vouchers, a family can potentially save approximately £2000 per year on childcare expenses.
For more detailed information, please refer to the government link provided below.
https://www.childcarechoices.gov.uk/guides/parents-eligibility-and-application/
https://www.gov.uk/guidance/childminders-and-childcare-providers-register-with-ofsted
https://www.tax.service.gov.uk/childcare-calc/
Can a Nanny Be Considered Self-Employed?
In most cases, according to HMRC rules, nannies are not typically classified as self-employed. However, there is an exception where HMRC may grant self-employed status to nannies. This exception usually applies when the nanny works in a series of temporary positions or works for three or more families simultaneously. In such cases, the nanny would also need to register with Ofsted as a childminder. To seek self-employed status, the nanny should contact HMRC directly, as each situation is assessed individually.
It’s important to note that HMRC generally allows anyone to register as self-employed, but being registered as such doesn’t automatically mean that all jobs can be performed under self-employed status.
To determine whether a nanny can be considered self-employed for a particular job, each new family should use the HMRC Employment Status Indicator. The responsibility for making this determination always falls on the employer. Incorrectly classifying a nanny’s employment status can result in significant fines from HMRC.
For further information, please refer to the government link provided below.
https://www.gov.uk/guidance/check-employment-status-for-tax
Managing Payroll for Your Nanny
While it’s certainly possible to handle payroll for your nanny independently, many families opt for the convenience of using a payroll service to ensure everything runs smoothly. If you’re seeking expert guidance on payroll matters and nanny-related expenses, we highly recommend considering NannyPay. They specialize in providing families with comprehensive nanny payroll services.
For more detailed information and to explore the services offered by NannyPay, please click on the NannyPaye link provided below. Their expertise can help streamline the payroll process and provide you with peace of mind when it comes to managing nanny-related financial matters.
