Under the new Self-Assessment tax regime, an employee is required to keep payslips, P45's (part 1a) and P60's (end of year summary) provided by their employer as proof of earnings (also needed when applying for a mortgage or loan). National Insurance Contributions go towards an employee's entitlement to unemployment and state pensions benefit.
If you don't declare your liability to pay tax, and it then comes to light, it is YOU the employer, not your Nanny, who will be pursued for the payment. Employers are also required by law to provide payslips for their nanny, detailing the tax and NI deductions made to her gross salary.
If your nanny splits his/her week between several employers you are still required to register. Nannies cannot be classified as self-employed (with the exception of maternity nurses), as they do not meet the Inland Revenue's self-employment criteria. Having two or even three part-time jobs does not make any difference in this respect.
HM Revenue and Customs will charge penalties to registered employers who are late with their tax/NI payments and Real Time Submissions. Failure to pay PAYE and National Insurance liabilities by the 19th (or 22nd if paying electronically) day in the following month results in interest being charged on the amount outstanding, and if you don't file your Employer's Annual Declaration by 19th of April you will incur penalties of £100 for every month you file late! Our Nanny Payroll Service costs £250 per annum- a small price to pay for complete peace of mind. And if your nanny stays for a shorter period, we will refund you £10 per month for the unused months or carry them forward for a new nanny. (From April 2013, Real Time Information comes into effect, click here for more information about RTI.)
We also now offer an e-service, for £220 per year. Reports will be sent to you via email, instead of post (excluding documents like P45's and P60's, of course). Your nanny will have to agree to receive payslips by email and send us an email confirmation of this.
We will submit your Employer's Annual Return and other submissions to HMRC "Electronically" as is now compulsory.
For some reason, nanny's like to agree a net wage. If you are taking on a nanny who already has another job, this can be problematic. Her pay may cost you a lot more than you were expecting as she may already be using her tax allowance with her other employer. For this and many other reasons, it is always best to agree a gross wage. If you are only paying a person for a part of the week, work out what they would be earning for full-time employment and pro-rata it. For example, if you wanted to pay £80 net for 1 days work, that would be £400 net for a full week. You can see from my net pay tables, that £400 net per week is equal to £516 gross per week (in 2012-13). So, a reasonable gross offer would be £103.20 gross per day.