Do I have to run PAYE if my nanny earns below the Personal Allowance?

Yes. You must register as an employer with HMRC and submit Full Payment Submissions on every payday, even if your nanny earns below the Personal Allowance of 12,570 and no income tax is actually due. The reporting obligation exists regardless of whether any tax is owed.

Can my nanny be self-employed to avoid nanny tax?

HMRC position is that nannies working regular hours in a single household do not normally meet the criteria for self-employment. Misclassifying an employee as self-employed can lead to significant backdated tax and NI bills, plus penalties.

What is the difference between gross and net salary for a nanny?

Gross salary is the agreed pay before income tax and National Insurance deductions. Net salary is what the nanny receives after those deductions. Always agree and advertise a gross figure.

Can I use Tax-Free Childcare to pay nanny tax?

Yes, in some cases. GOV.UK confirms that if you employ a nanny directly and are eligible for Tax-Free Childcare, you can use your childcare account to pay the income tax and National Insurance contributions owed for your nanny, as well as their wages.

What happens if I do not register as an employer with HMRC?

Failing to register as an employer and run PAYE is a legal breach. HMRC can pursue you for all unpaid income tax and National Insurance, including amounts that should have been deducted from your nanny pay, your employer NI contributions, plus interest and penalties.