Nanny Tax Calculator
Calculate the total cost of employing a nanny, including employer’s National Insurance contributions, pension contributions, and your nanny’s take-home pay.
Employing a nanny in the UK comes with specific financial responsibilities beyond just paying a salary. As an employer, you’re legally required to handle tax and National Insurance contributions, set up a workplace pension, and ensure proper employment contracts. Understanding the total cost of employing a nanny is crucial for effective budgeting and compliance with UK employment laws.
When discussing nanny salaries, it’s important to distinguish between gross and net pay. A gross salary is the total amount before any deductions, while net salary is what your nanny actually takes home after tax, NI, and other deductions. Industry experts recommend always agreeing on a gross salary with your nanny to avoid unexpected costs and complications.
The total employment cost typically includes the nanny’s gross salary, employer’s National Insurance contributions (currently 13.8% above the threshold), and employer’s pension contributions (minimum 3%). Additionally, you must have Employer’s Liability Insurance, which costs approximately £109 per year.
How to Use the Nanny Tax Calculator
Step 1: Select Your Salary Type
Choose whether you want to calculate based on a gross salary (before deductions) or net salary (take-home pay). For more accurate budgeting, we recommend using gross salary as it provides a clearer picture of total employment costs.
Step 2: Enter Salary Details
Input the salary amount and select the appropriate period (weekly, monthly, or annual). For part-time nannies, be sure to include the number of hours worked per week to calculate accurate hourly rates.
Step 3: Provide Additional Information
Enter your nanny’s tax code (default is 1257L) and select your location (London or Rest of UK). Check the appropriate boxes for pension contributions and student loan repayments if applicable.
Step 4: Review the Results
After clicking the calculate button, review the comprehensive breakdown of costs including gross salary, tax deductions, NI contributions, pension contributions, net pay, and total employment cost. Pay special attention to the highlighted total cost figure for accurate budgeting.
Step 5: Save for Your Records
Use the calculation results for budgeting and planning purposes. Remember that these figures are estimates and may vary based on individual circumstances. Consider consulting with a nanny payroll service for personalized advice and assistance with your specific situation.