Get the help you need without a tax headache

Do you think of yourself as having domestic staff'? Probably not. But if you are part of a dual-working household, and particularly if you have children, the odds are you do. Emma Simon, writing in The Sunday Telegraph, points to a survey from insurers Churchill, which suggests that some six million people now pay someone to help them in their house or garden.

And not all of those people will appreciate the responsibilities that come with having staff. If you are deemed an employer by HMRC which you will be if the person mostly works for you, or gets the bulk of their income from working for you then you are responsible for creating a pay roll, for paying employers' national insurance (NI), for collecting your employees' income tax and NI, for maternity pay, holiday pay, sick pay and, of course, for redundancy pay. The tax and NI bit is a nasty bit of administration, so it makes sense to hand it to an agency.

But before you do, make sure you have the right kind of contract with your new employee. Historically (I'm not sure why) nannies have had their salaries quoted net of tax, rather than gross, like the rest of us. This might have made sense once, but it doesn't today.

Try 6 free issues of MoneyWeek today

Get unparalleled financial insight, analysis and expert opinion you can profit from.

Start your trial

Sign up for MoneyWeek’s free twice-daily newsletter.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Sign up

Why? Partly because if you pay the nanny net of tax, and the personal allowance rises, she will get no more net income, but you will pay less tax on her behalf. Nice for you maybe, but it rather misses the point of the government's only coherent tax policy.

But in any case it is also about you: if you are contractually obliged to pay her a net amount, you may end up liable for non-tax payments that are deducted from her gross salary ie, student loan payments or county court judgements. So don't pay net. Pay gross.

Finally, come 2017, everyone employing even one person must enrol them into a pension scheme and unless they opt out pay into it for them.

If this all sounds too much, there are ways around it. If you share someone's services with other families, or they have income from other work, they should be deemed self-employed (and so not your tax problem). Otherwise, you might consider the only middle-class tax break left: an au pair.

Au pairs are effectively paid partly in kind (food, board and the opportunity to practise their language skills by living with a family) and partly in cash. As long as the cash part (considered "pocket money" by HMRC) doesn't exceed UK personal allowances, no tax need be paid.

The income tax personal allowance is currently £181 a week and you pay NI on incomes over £149 a week. Stick under that and you'll be getting quite a lot of the help you might need but none of the administration you really don't.