Well, don’t hold your breath. At The Elite Nanny Company we’ve taken a good hard look at the criteria and the number of families who can actually cut their National Insurance costs is going to be quite low.
Here’s why:
Government Guidelines on employing people in your home.
The UK government says that anybody except an au pair who works in a private home is treated as an employee (as long as they only work for one family). So gardeners, nannies and housekeepers all count – if they are only working for one family. If you hire them, than makes you their employer and on that basis you must give your employee:
- an employment contract
- payslips
- the right to not work more than the maximum hours allowed each week
- at least the National Minimum Wage.
Nanny employment related benefits
They also have rights to employment related benefits, if they are eligible, such as:
- statutory maternity pay and sick pay
- paid holiday
- redundancy pay.
So, on that basis, you might believe you are eligible for this new Employment Allowance that allows a reduction of £2,000 on National Insurance payments, but that almost certainly isn’t the case because:
Whilst employers who pay Class 1 National Insurance on their employee’s earnings are eligible for the new Employment Allowance scheme, it generally excludes the following categories:
- Freelancers and contractors who pay Class 2 and Class 4 National Insurance Contributions
- Those who are personally employing another person for domestic work, such as gardeners or nannies
- Companies providing in the public sector
- Those who provide services to a a public sector body.
It’s point 2 that is going to wipe out most family’s hopes about a tax reduction! Or, as an HMRC spokesman put it, “Whether someone is an employer depends on the nature of the contract. In the case of most services people buy, there is not an employment relationship.”
Who can benefit from the ‘Nanny Tax’ break?
However, there are some exceptions:
- Those hiring a nanny to help with caring for a disabled child
- Those who employ a care or support worker, either for themselves or another person.
So there’s scope for a small percentage of families to benefit from this tax break and we certainly hope that the government can be encouraged to extend this potential benefit to a wider range of families in the future.