Special tax rules concerning domestic staff

Employing a nanny, cleaner, carer or other domestic staff leads to the question what kind of tax obligations you have to be aware of. Since you may be classed as an employer and may have to deduct Income Tax and National Insurance contributions from the wages through the Pay As You Earn (PAYE) Scheme, you should be informed about statutory divisions.

For instance there are special rules to workers supplied and paid by agencies, which mean that the agency usually has to operate PAYE. If you employ someone yourself to specifically follow your instructions, this person may be considered your employee. In this case whether or not you need to operate PAYE depends on your employee’s overall earnings. Generally, if you pay your employee more than a certain amount per week you’ll have to operate PAYE. If the employee has another taxable income such as another job or a pension, you may need to operate PAYE no matter what he/she earns.

In addition to these adjustments, you always have to keep in mind the employees rights which might affect you since everyone you employ, have employment rights, even if they are part-time. Special consideration is needed to the very strict rules and regulations if you are thinking of employing an individual who is not a UK national.

Therefore, it is worth it to thoroughly think it through before hiring someone. If you are thinking along these lines, do not hesitate to contact us for assistance.