Paying Domestic Staff Tax, National Insurance & Pension Contribution
All domestic staff employers must make Tax, National Insurance and Pension contributions, on the behalf of their employees including temporary or part time household staff.
All employers, are legally obliged to make Tax, National Insurance and Pension deductions from their employees' wage and pay this to the government on the employees behalf. This includes Nanny Tax, Housekeeper Tax, Butler Tax, House Manager Tax, Chauffeur Tax etc...
The Basics of How it Works?
- All employees in the UK are obliged to contribute financially to the state through Pay As You Earn (PAYE).
- Domestic Staff Tax and National Insurance is deducted every time the employee is paid, throughout the year.
- The employer is responsible for making those deductions and paying what they have collected to HMRC on your behalf.
- The employers are responsible for operating a PAYE scheme for the employee.
- The employers deduct the Tax and National Insurance an employee owes from their gross earnings.
- The employers then pay the deducted amount to HMRC on the employees behalf.
- The employers will pay a minimum of 3% in to the employees pension scheme.
- Check that they are registered under a PAYE scheme.
- Keep a record of payslips every time they are released.
- A payslip will show how much Tax and NI an employee is paying to HMRC, as well as their individual tax code, pension contributions and their net (take home) pay.
- Important: Never assume that tax is automatically being paid by an employer, especially if regular pay slips are not being issued. Many domestic staff have fallen foul due to this and have experienced difficulties as a result. Many employers have been heavily fined.
The Danger of NOT PAYING Domestic Staff TAX
It is considered a criminal offence to not pay the correct amount of Tax and National Insurance. If caught, both an employer and an employee could face a series of penalties. These may include:
- Repayments of any unpaid Tax and NI to HMRC including interest
- Potential fines for lack of payments and also lack of RTI information
- Criminal investigation with a risk of prosecution and imprisonment
While being paid 'cash in hand' may seem nice and easy in the short term, it can create long term difficulties for the following;
- Sick Pay
- Maternity Pay
- Applying for a mortgage or loan as lenders require proof of earnings
Perfect Household Staff Offer the following:
1. Ensure that the employee has the right to work in the UK.
The complete candidate document package will be submitted to you following the placement.
2. Negotiate a gross salary with your employee.
Many Employees want a net salary but we recommend agreeing a gross for numerous reasons.
3. Find out the total cost of employing any staff.
Your total cost will include your employee's gross wage, employer's NI, and possible pension contributions.
4. Ensure that a contract of employment is in place.
Perfect Household Staff offer a tailored contract of employment.
Employing Domestic Staff
To see a wider range of Household Staff such as butlers, chauffeurs, chefs, personal assistant, etc... please click on the link - Household Staff for Hire
To find Specialist Childcare Services, please click on the link - Specialist Childcare Services
Our Residence & Estate Management services are found on this link - Residence & Estate Management