Hiring a nanny is an expensive endeavor, which requires parents to consider their salary, taxes, national insurance, and pensions. All of this complexity leads us to a single point that after April these nanny charges are bound to increase. With London being an expensive city to live in, this only adds strain to families already struggling. Parents are also dealing with the rising costs of childcare, which makes it extremely essential to look for cost effective solutions.
What are the reasons for these increases
It is important to note that nanny employees have wage requirements, which means when a family hires a nanny, that family turns in to an employer. Hence, families who hire nannies, cleaners or gardeners are responsible for taxes and other contributions, similar to businesses. This also includes ensuring taxation for income, national insurance, student loans and even pensions to be handled over using PAYE. In addition to all of that, you cannot forget that free holiday pay is contractually obliged.
As it stands, a nanny who is hired outside London earns a yearly salary of about £40,326. This figure would then include an employer’s NI contribution which amounts to approximately £4,309 as well as an automatic pension contribution of around £1,023 raising the employment cost to around £45,658. However, the national insurance contributions are expected to rise by 1.25% beginning April of next year. This would increase the NI contribution for the same salary to approximately £5,299, increasing the employment cost of hiring a nanny to about £46,648. This looks to stress families with an additional £1,000.
Why It Would Be More Difficult For London Parents To Cope
As noted earlier, the employment cost of hiring a nanny has risen by approximately 40% since 2021 and so higher wage regions such as London will suffer the most. As it stands, a full-time nanny in London earns a salary of about £46,228. This amount alongside tax and pension contribution would come to a total of around £52,551. It is expected that starting in April, this figure would increase by an additional £1,061. At this point with a rise in higher NI contributions, the adjusted cost would come to approximately £53,612.
The government’s allowance for Nanny’s payroll costs seem at odds with their policies. Offsetting a huge cost of employing Nanny’s, policies disallow Nanny’s to be employed for household chores which further restricts parents hiring the nannies on government relief programs.
Cutting Costs for Parents
Policies disallowing a lot of Nanny’s costs will worsen the situation for households, so parents will have to get creative in order to lower the cost. One way of getting a creative that a parent can do is pooling together. Sharing services between a nanny spanning multiple families or hiring one nanny to take care of multiple kids across two families is a great example. But parents need to remember that without an external policy, there is no guarantee how they могат to handle disputes, sick leaves and many others, so it is important to include explicit terms in the contract.
The other method is to use the Tax-free childcare scheme – only if you are eligible though. This is especially helpful for families where the household income of both parents is under £100,000 in a year. If your nanny is Ofsted-registered, you can put funds into a tax-free childcare account. Every time you put in ‘8’ onto the account, the government would sponsor ‘2’ up to £500 in three months for every child under 12—it’s a great saving deal. This scheme saves a portion of tax you would have paid and indirectly goes to your nanny’s wages.
Alternatively, you can make the payment cutoffs directly with your nanny, you may be able to provide some non-monetary benefits such as paid leave or else to a nanny, instead of reducing the payment rate, this allows for the balance to be ensured with every wage bill that has gone down.
In conclusion, Do you actually need to have a full-time nanny or is there any other easy way which can be much cheaper than hiring a full time nanny? Opting for a registered childminder over hiring a live in nanny will certainly help you make savings, furthermore, childminder services are much cheaper. For 25 hours, 25 hours of childminder services cost almost sixty percent less than the price of a full time nanny.
To even out the changes in costs that will occur as the next Tax Year is getting close, Parents can also make use of options like sharing nannies, tax free childcare account, looking for other compensation offsets or going for forms other than a nanny such as a daycare. This also takes the sting out of this surge in the “nanny tax.”