Save tax by employing your nanny through your company

December 3, 2018|In KRW Tax Tips|By Keith Witchell

Those employing the services of a nanny to look after their children will usually fund the nanny’s salary out of their net of tax income.

However, what if you instead employed your nanny through your company, by adding them to the company’s payroll?

By doing this, the nanny’s salary would be treated as a benefit in kind, which means that it would be subject to personal tax on you, and Class 1A NIC (@ 13.8%) on your company. However, the nanny’s full salary plus Class 1A NIC would then attract Corporation Tax relief.

Getting the company to pay the nanny will mean that you can then reduce your salary/dividends from the company, since you will need less income by not having to fund the nanny personally. This saves personal tax (and employees NIC (@ 12%), depending on salary level).

Furthermore, you have the cost savings of not having to run a separate payroll and pension scheme personally for your nanny.

Key Facts

  • Anyone employing the services of a nanny will usually fund it out of their net income
  • Employing the nanny through your company means the company foots the bill
  • The nanny’s salary will be a benefit in kind, but you can reduce your salary/dividends
  • There’s also a potential cost saving from not needing a separate payroll/pension scheme

For further advice on this matter, please contact me.

Keith Witchell