What Taxes Do I Need to Pay for My Nanny?
Nanny Tax UK Explained: Here’s what you owe as a parent employer.
Hiring a nanny isn’t just about finding the right person to care for your children — it also means becoming an employer in the eyes of HMRC.
That comes with responsibilities, including paying the correct taxes and National Insurance.
Here’s a simple breakdown of what you owe, how it’s calculated, and how to stay compliant.
1. The Key Employer Taxes You’ll Pay
When you employ a nanny in the UK, you’re responsible for collecting and paying several taxes through PAYE (Pay As You Earn):
Income Tax – deducted from your nanny’s wages based on their earnings and tax code.
Employee National Insurance (NI) – also deducted from their wages.
Employer National Insurance (NI) – an additional amount you pay as their employer.
💡 Both types of National Insurance are calculated automatically when payroll is run each month.
2. Income Tax Explained
HMRC sets tax bands each year.
For the 2024/25 tax year:
The Personal Allowance is £12,570 — your nanny won’t pay Income Tax on earnings below this.
Anything above that is taxed at 20% (basic rate) up to £50,270.
As the employer, you withhold Income Tax each pay period and send it to HMRC through your PAYE account.
3. National Insurance Contributions (NICs)
You and your nanny both pay National Insurance on their wages:
Employee NI: 12% on weekly earnings between £242 and £967.
Employer NI: 13.8% on earnings above £175 per week.
You submit both contributions to HMRC at the same time as the Income Tax each month.
4. Pension Contributions
If your nanny earns more than £10,000 per year and is aged 22–66, you must automatically enrol them into a workplace pension.
The minimum contribution rates are:
5% from the employee (deducted from pay)
3% from you, the employer
Hirelo automatically tracks and calculates this so you never miss a payment.
5. Holiday Pay and Statutory Payments
While not taxes, these are legal payroll obligations often confused with them.
You must pay:
Holiday Pay – at least 5.6 weeks per year (pro-rata for part-time).
Statutory Sick Pay or Maternity Pay where applicable (Hirelo can help you claim some costs back through HMRC).
6. How Payments Work in Practice
Each month you:
Run payroll (calculate gross → net pay).
Submit a Real Time Information (RTI) report to HMRC.
Pay HMRC the total deductions (Income Tax + Employee NI + Employer NI).
Pay your nanny their net salary.
Hirelo automates this entire process — you simply approve the payslip.
7. Common Tax Mistakes to Avoid
🚫 Forgetting to register as an employer before payday.
🚫 Paying cash-in-hand without reporting it.
🚫 Missing HMRC payment deadlines.
🚫 Confusing pension contributions with NI deductions.
Getting these right protects both you and your nanny — and ensures smooth employment.
Final Thoughts
Once you understand what taxes are due, running nanny payroll becomes straightforward.
Income Tax, National Insurance, and pension contributions are the core elements — and with the right system, you’ll never need to calculate them manually.
Hirelo makes sure everything is filed, paid, and compliant — so you can focus on family life, not forms.