Do I have to pay tax on my nanny?

In a word, yes.

That was a short blog post, wasn’t it? Let’s see if we can expand it a bit.

In the UK, there is a small percentage of parents that do not pay the taxes that they should on the cost of their nanny.

Here are six reasons that you really, really, should pay tax on your nanny

  1. It’s illegal not to. The HMRC takes a dim view of tax evasion. By paying your nanny in cash and avoiding tax, you’re opening yourself up to back payments, very large fines, and prosecution. By the way, it’s not your nanny that gets punished – it’s you, as the employer.
  2. People do get caught. You’d be risking discovery not only during the life of your nanny’s contract, but in the immediate years afterwards as well. One of the most common ways nanny tax evasion is discovered is when the nanny takes on a job ‘on the books’ after one that was not, and the HMRC becomes aware that things were not done properly in the past.
  3. The nannies want you to. It’s important to most nannies that they are paid on the books, and most career nannies would never accept an illegal position. (Quite the opposite – some have been known to report families who ask them to evade taxes during their interview.) One practical consequence of being ‘off the books’ for nannies is that they aren’t making national insurance contributions. This means in later life they won’t receive the pension they were entitled to. Being paid cash also makes nannies feel much more vulnerable in terms of employment rights.
  4. It’s not that difficult to be legal. If you’re employing a sole nanny, there are lots of nanny payroll companies that can help you out. If you’re doing a nanny share, we can sort it all out for you. Either way, the paperwork is manageable from your perspective.
  5. It’s the right thing to do. ‘Nuff said. You know this already.
  6. It doesn’t have to be unaffordable. Childcare is incredibly expensive, and it’s very hard for many families to afford it, so it might be tempting to pay your nanny in cash, or do a cash ‘top up’. If you’re finding it hard to afford a nanny, but your situation requires you to have one, consider a nanny share to bring down the cost. A Koru Kids nanny share could cost £9-11/hour, including all the taxes – that’s the same as the average net pay of a sole nanny.  

 To investigate nanny share as a way to cut costs legally, register here