From September, both our children will be at school. We mean to keep our nanny on full time as we’d struggle to find a flexible, part-time replacement to jump in on sick days, as well as to do school drop-offs and pick-ups on the days we commute. As she will have less to do during term time, we’ve discussed her helping me with business-related administrative tasks, which she’s keen to take on when time allows. Can I now start paying her through my limited company to offset her salary?
Kirsty Wild, a nanny employment and payroll expert from payroll services provider Nannytax.co.uk, says this question is being asked more often, in part because the role of nanny has shifted in recent years.
As such, the nanny-personal assistant is increasingly sought after, mostly by households with school-age children and where both parents are working full time. Kensington Nannies, a nanny agent, says that hybrid roles — mostly nanny PAs — will make up 40 per cent of all nanny jobs starting in September, a peak time of year for new hires.
Our Nannytax salary index for 2023-24 shows the average salary for a full-time UK nanny is £40,326 a year, and £46,228 a year in London. But employment agencies report that nanny PAs can earn upwards of £65,000, hence parents want to know if they can pay through their businesses. Some also have payroll in place for existing employees, and they’re looking to simplify the admin burden by putting the nanny on staff. However, this is not allowed.
Even if your nanny is working a hybrid role that includes business-related PA tasks, HM Revenue & Customs does not allow nannies to be paid through your company’s payroll, as most of their role is that of caregiver. And, where the priority is childcare, normal nanny payroll rules must apply.
As a nanny employer you’re responsible for employers’ auto-enrolment pension contributions, national insurance contribution expenses and employers’ liability insurance, as well as making sure you have an employment contract in place, detailing annual leave arrangements and any sick pay and parental leave beyond statutory limits.
We’d urge all families employing full- or part-time nannies to check they’re compliant with tax and employment rules. Another common oversight includes assuming nannies can be self-employed, when the vast majority must be employed. It’s always best to agree on a gross salary with your nanny, rather than discussing net amounts, so you can work out overall costs.
A legitimate way to save money when hiring a nanny includes paying them through the Tax-Free Childcare scheme, provided you’re eligible and they are Ofsted-registered. You could also consider a nanny share arrangement with another family. Just bear in mind that each family must pay the nanny separately, and each must pay at least minimum wage. You’ll also need to provide the nanny with separate employment contracts.
Can we carry on our philanthropy work after our divorce?
I am going through a divorce and want to continue my philanthropic pursuits when we’re separated, but how do I go about this? I want to continue with my ex as co-trustees but also look at pursuing my own, separate charitable path. Is there anything specific we need to think about to ensure this is possible?
Katharine Bundell, barrister at 4PB, says it is perfectly possible to remain as co-trustees after divorce, but there is an inherent risk as experience shows disagreements can arise later as the family landscape evolves.
There is a cost/benefit analysis to be undertaken; the time and energy required to renegotiate and reorganise now could be dwarfed by the emotional and financial cost of a disagreement down the track.
First, reconsider the trust deed and any amending documents: these give you all of the terms and conditions of your trust. Some trusts and articles of family companies limit the involvement of an ex-spouse, for example. If you want to change or augment the terms you could draft a letter of wishes (not binding, but indicative of your current intentions) or a formal deed of variation (binding).
Think too about your mechanism to settle disagreements. You might appoint a neutral or professional third trustee. What about making your final donations out of joint funds now as part of your divorce settlement?
Ultimately, a court is bound to consider a clean break after a divorce, and instinct dictates it may be sensible to wind down any joint trust and set up sole name trusts which would give you complete freedom of choice.
Just a couple of other factors to consider. Some people try to evade paying a fair settlement by placing assets in a trust to put them out of reach. The court takes a dim view if it decides this has happened. If it finds the trust was set up because of or with reference to the marriage or a nuptial settlement, it can change the terms of it, as far as it needs to do so for the purpose of making a fair order. It can also make orders on the assumption the trust will pay money out, or that you can control the trustees, even if the terms do not say that.
Our next question
I am looking to invest in alternate types of assets to broaden my portfolio and am considering art. However, I am not overly familiar with the market and have heard a lot of stories about art investment scams. I am worried about falling victim to this type of fraud, so how can I be sure my investment is safe? Are there any checks I can do or general warning signs I should look out for when investing in art?
Some people make regular income payments into a trust. The court orders regular maintenance payments for a spouse based on their assessed need and also affordability. The court is highly unlikely to accept that payments to a philanthropic cause should take priority over maintenance awards.
The court does not interfere with how you spend your own money, but payment of a divorce settlement takes priority over philanthropic choices.
So don’t try to use the trust to hide assets or divert income, and have a careful read of your trust deed. Take advice and draft any further trust terms you might need now and think seriously about splitting your funds into sole name trusts.
Additional input from Rhiannon Lloyd, barrister at 4PB.
The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.
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