The UK is in big trouble. How much trouble? About ten percentage points of GDP worth. That's the difference between our tax take as a percentage of GDP and the amount our government spends (around 36% versus around 46% respectively). The authorities are doing their best to deal with this seemingly intractable problem with a minor programme of spending cuts and a very major programme of financial repression (keeping interest rates way lower than inflation). But while they wait for all this to work (it could take a decade), it clearly makes sense for them to try and push up the tax take in any small way possible.
That's why we have seen a rolling campaign against loopholes of all sorts (epitomised by the £50,000 cap on tax reliefs announced in the budget, a measure that appears to take out the investment bonds industry and the charity sector with one blow) and another against tax evaders of all kinds. First it was plumbers, then it was dentists and doctors. Now it is nannies. According to the government, there are 30,000 nannies working in the UK, one-fifth of whom are not paying or having paid for them all the taxes that are due. You can see why. Hire a nanny in London for £500 a week and you might think your total cost of childcare comes to £26,000 annually. But you would be very wrong. Add income tax (£104.93), employee's national insurance (£63.65) and employer's national insurance (£73.79) and it comes to £38,583. Which is why so many otherwise law-abiding parents take a deep breath and pay the people looking after their kids in cash.
So what do you do if you haven't been paying all you should? You could hope that you get away with it which you might. But if that isn't a risk (moral or absolute) that you fancy taking, you will need to contact the HMRC and tell them. Then you will have to pay a fine of some sort (think all the tax due plus a 100% fine) and get started on the pile of paperwork that comes with being tax-compliant. You'll need a P16A to get your payroll service started, says The Daily Telegraph. You'll need to fill in bits of your nanny's P45. And you'll need to make sure you are getting their holidays, sick pay and maternity rights right as well.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
If you can't face that, you can delegate it to a nanny tax firm who will do it all for you (adding yet another cost). Otherwise you can do what thousands of other professional women, faced with almost impossible bills and admin, do: go part time and hire a live-in au pair to help. Pay under £143 a week and you and HMRC will have no business with each other (see www.nannytax.co.uk for more).
-
Car tax rules are changing: what are the new vehicle excise duty rates?The rules around vehicle excise duty are changing this April. What are they, and how are they going to affect you?
-
Most affordable cities for single homebuyers revealedBuying a home by yourself? Analysis by Zoopla reveals the most affordable cities in the UK
-
Brace for a year of tax risesThe government is strapped for cash, so prepare for tax rises. But it’s unlikely to be able to squeeze much more out of us.
-
Cut taxes? No, reform them insteadOpinion The way the state raises money is far too complicated, says Merryn Somerset Webb. Time for a radical revamp.
-
The High Income Child Benefit Charge - is it the most illogical, unfair and unnecessary tax?Analysis We may not like taxes, but this one is blatantly unfair, penalises middle income earners and adds to the gender pensions gap, says Kalpana Fitzpatrick.
-
Hunt ditches changes to IR35 tax ruleAdvice The new chancellor has scrapped plans to reform the IR35 tax rule for contractors and freelancers.
-
How the mini-Budget tax cuts will affect youAdvice Chancellor Kwasi Kwarteng's mini-Budget was full of tax cuts that will change your take-home pay
-
The tax cut that would do most goodOpinion Tory leadership candidates are promising tax cuts. Matthew Lynn explains which one the winner should prioritise.
-
The myth of hypothecated taxesEditor's letter The government wants to add a penny on our National Insurance contributions to pay for social care. But it won’t, says Merryn Somerset Webb. It will just vanish into the black hole of our public finances.
-
How much of your salary goes on tax?Features This handy website breaks down how the government spends your hard-earned pounds. But be warned, says Merryn Somerset Webb - it's not for the faint-hearted.
