In home care for young children can be very expensive. You’ve got lots of bills to pay like your mortgage, all the food bills and then your nannys wages for looking after your little ones. It can be tempting to skip paying the relevant tax for your nanny if any is owed but what are the implications?
Reporting nanny tax wages and paying taxes is unfortunately the law in the UK and there’s not really anything you can do about it apart from maybe having your nanny work less hours. Then they may not be liable to pay tax which saves you a headache. Remember though it is what you should be doing legally so if you don’t pay taxes you could be liable for some hefty fines if caught so it’s not advisable.
The Risks Involved
You and your nanny as well as the whole family could face a stiff penalty or fine.
If you have filed a personal tax return and used your money to pay your nanny without declaring tax you are committing both a criminal and civil crime so you could have all sorts of forces on your back.
The inland revenue come down very hard on tax avoidance and are regularly making these types of crime public knowledge so you get the fine and shame in one hit! Not to mention the possibility of a suspended criminal sentence and in severe cases of tax avoidance an actual prison sentence.
Your nanny could and often does also face a punishment which can be financial and possibly even worse for her. If she is part of any trade associations (which she should be) then there is a possibility of her being struck off and losing the ability to continue her career.
Is it really worth all this risk for what could actually be a fairly small sum of money in the grand scheme?
Contact the Inland Revenue and come clean!
The Rewards For Doing It Right
We’ve covered the risks so now lets take a look at the reward. Mainly they are peace of mind in knowing that you are doing the right thing and securing both your and your nannies future. There can also be tangible benefits too though.
The Tangible Benefits For Your Nanny In Paying Tax:
- Your Nanny will be paying national insurance so that safeguards her pension in the future which will be important to her.
- Your nannies salary will be able to be verified by companies like Equifax who are credit reference agencies used by load and mortgage companies. If your nanny says she is earning money but nothing is being officially logged then she will find it hard to get any kind of load if required.
- Your nanny will be able to claim unemployment benefit if she is made redundant. Without having recorded work history and tax payments she will find it hard to get instant tax benefits if she is unlucky enough to lose her job.
Calculating Nanny Tax:
It’s advisable to use a nanny tax agency to pay the bills for you and keep everything above board. This is a slightly more expensive route to take but give you peace of mind and less paperwork (if any) to complete yourself. You can find various nanny tax calculators online which will help you get the payments right if you are going to do it yourself.
So in summary don’t be a cheapskate and take risks with your own finances and your nannies career. Pay the nanny tax!