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When organising a nanny share DomesticPaye is aiming to achieve a fair result for all parties concerned. This may be two or more families and of course the nanny.
To achieve this our first step is to move the proportions of tax free allowances away from a 100% allocation to one employer and distribute them pro rate between the employers involved. By doing this each employer has at least some of the tax free allowance that they can use before paying 20% tax on the nanny's pay. This is obviously not as good as being the only employer and having 100% of the allowance but it is also far better then being classed as the second employer and receiving none of the allowance.
The next move is then to decide if you wish to:
(A) Stay with your net agreement and so ask DomesticPaye to split the tax code with HMRC so we can run it for payroll purposes.
(B) Note the new gross wage amounts and revert to a gross agreement that leaves your nanny overall with the correct net pay.
(A) Tax Code Splitting 'our specialty'
Most nannies agree a net wage with their employers because they want to understand what they are being paid, with nanny shares being no exception. To keep the employers costs at a reasonable and fair amount we can apply to HMRC to put in place the split tax codes we calculated during the above process. This means that you can keep paying your nanny the same net wage and the taxes will be calculated using a pro rate amount of the tax free allowance. This has the obvious benefit to both employer and employee of being straightforward and easy to manage.
(B) Change your agreement to a new gross amount
To avoid the need to involve HMRC in splitting tax codes employers can choose to change the agreement they have with their nanny to a gross basis however set at the new higher gross salary that they would have paid should the tax code split have been implemented.
For example your nanny's net wage may have been £200.00 per week net with a higher gross of £272.22 due to the lower tax free allowances being allocated to you.
The other family may have a mirror agreement with again £200.00 net and £272.22 gross. The employers involved can now choose if they wish to then fix the pay at the gross amount and simply apply the normal 603L and BR tax codes to the pay.
This then has the effect of:
Employer 1 Paying more to the nanny and less to HMRC
Employer 2 Paying less to the nanny and more to HMRC.
Overall however the nanny will receive the same net amount of £400.00 per week and the employers have the protection of a gross agreement.
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