Nanny tax in the UK · 2026/27
Nanny tax, PAYE and National Insurance for UK household employers.
“Nanny tax” is not a separate UK tax. It is shorthand for the PAYE and employment-tax responsibilities that can arise when a household employs a nanny, including Income Tax and employee National Insurance deducted from gross pay, employer National Insurance paid by the household, and pension contributions where automatic enrolment applies.
What does “nanny tax” actually include?
For a nanny who is an employee, the household normally operates PAYE so HM Revenue & Customs can collect Income Tax and Class 1 National Insurance. Employee Income Tax and employee National Insurance are deducted from gross pay. Employer National Insurance is an additional household cost, not a deduction from the nanny’s agreed gross salary.
Workplace-pension duties can sit alongside PAYE where the nanny meets the automatic-enrolment criteria. The household setup therefore needs to account for PAYE, National Insurance and workplace pensions. The exact amount due is not one fixed “nanny tax” percentage.
The main 2026/27 PAYE and National Insurance figures.
These figures apply from 6 April 2026 to 5 April 2027. The Income Tax table below is for England and Northern Ireland, which covers a London household.
| Item | 2026/27 figure | How it affects a household employer |
|---|---|---|
| Standard Personal Allowance | £12,570/year | Income Tax depends on the nanny’s tax code and taxable income above the applicable allowance. |
| Basic PAYE Income Tax rate | 20% on the first £37,700 of taxable income above the PAYE threshold | Higher rates apply once taxable income moves into the higher bands. |
| Employee National Insurance, category A | 8% between £12,570 and £50,270; 2% above £50,270 | This is deducted from the employee’s pay through payroll. |
| Employer National Insurance, category A | 15% above £5,000/year | This is paid by the household on top of gross salary. |
| Automatic-enrolment earnings trigger | £10,000/year | Age and earnings criteria determine whether an eligible worker must be automatically enrolled. |
| Qualifying earnings band | £6,240 to £50,270/year | Many defined-contribution schemes use this band to calculate statutory minimum pension contributions. |
Official sources checked 7 August 2026: HMRC employer rates and thresholds and The Pensions Regulator automatic-enrolment thresholds.
Passage preserved from the original guide
How do you calculate nanny taxes?
Calculating the correct amount of income tax and NICs involves considering your nanny's salary, tax code, and any allowable deductions. Employers also pay employer's NICs on top of the employee's contributions. Keeping accurate records of these calculations is essential for compliance and for annual reporting requirements.
In practice, payroll software uses the employee’s pay period, tax code, National Insurance category and year-to-date information. A simplified annual example is useful for budgeting, but it is not a substitute for the payroll calculation on each payday.
How much could nanny tax be on a £40,000 gross salary?
This simplified 2026/27 illustration assumes a London employee with a standard £12,570 Personal Allowance, tax code consistent with that allowance, National Insurance category A, no other income, no student loan and no other payroll adjustments.
- Gross annual salary
- £40,000.00
- Income Tax deducted from gross pay
- £5,486.00
- Employee National Insurance deducted from gross pay
- £2,194.40
- Indicative net pay before pension or other deductions
- £32,319.60
- Employer National Insurance paid on top
- £5,250.00
- Gross salary + employer NI
- £45,250.00
This is an annual budgeting illustration, not a payslip calculation or personal tax calculation. Actual deductions can differ because of the tax code, pay frequency, prior pay, National Insurance category, pension scheme, benefits, student loans and other circumstances. Private households employing a nanny for personal domestic work normally cannot use Employment Allowance.
A simple calculation structure still starts with gross salary.
Suppose your nanny's gross salary is £30,000 per year. Here's a simplified breakdown:
- Employee Income Tax: Calculated based on tax bands after the personal allowance.
- Employee NICs: A percentage of earnings above the NIC threshold.
- Employer NICs: An additional percentage paid by you on earnings above the employer threshold.
- Pension Contributions: Both employer and employee contributions if auto-enrolment applies.
Adding these figures provides the total annual cost of employment. Utilizing payroll software or consulting with a payroll service can help ensure accuracy.
Who pays what when a household employs a nanny?
Separating deductions from employer on-costs makes salary negotiations and budgeting much clearer.
The employment contract states gross pay before payroll deductions. Income Tax and employee National Insurance are normally taken from this gross amount.
The household operates PAYE where required, deducts and reports employee amounts, and pays employer National Insurance in addition to gross salary.
PAYE reporting tells HMRC what the employee was paid and what tax and National Insurance were deducted or due.
Where automatic-enrolment duties apply, pension contributions are handled under the scheme rules as a separate employment obligation.
Why agreeing a gross salary is cleaner than promising a net figure.
A gross salary defines the employment figure before deductions. The nanny’s tax code and other circumstances can then be applied through payroll without turning those personal tax variables into an open-ended household promise.
When comparing a proposed salary with the overall budget, keep three figures separate: gross pay, employee deductions from that gross pay, and employer on-costs paid in addition.
Compare salary with the full cost of employing a nannyHow do you pay a nanny legally in the UK?
This page explains the tax concepts rather than every payroll submission step. At a high level, a household employer should confirm employment status, agree gross pay and employment terms, register with HMRC before the first payday where registration is required, and operate payroll using suitable software or a payroll provider.
Use the complete household-employer guide See how payroll actually works from payday to HMRC reporting- Confirm the working relationship
Employment status depends on the facts of the engagement, not just the label used in an agreement.
- Agree gross salary and terms
Record the role, hours, gross pay and other employment particulars before the position starts.
- Register and set up PAYE
HMRC says an employer must register before the first payday and cannot register more than two months before starting to pay staff.
- Run payroll and report to HMRC
Payroll software calculates pay and deductions and reports employee payments to HMRC on or before payday.
Can a nanny simply be treated as self-employed?
No label should be chosen purely to avoid PAYE. Employment status must reflect how the work is actually carried out, and tax status can differ from employment-law status.
HMRC’s Check Employment Status for Tax tool can be used to assess whether a specific engagement should be treated as employed or self-employed for tax purposes. HMRC states that it will stand by the result when the information supplied remains accurate and follows its guidance.
Where the facts point to employment, the household should operate the employer obligations that follow rather than asking the nanny to invoice as a shortcut.
Check employment status for tax on GOV.UKDoes nanny tax include a workplace pension?
A pension is not a tax, but it belongs in the same employer-cost plan. For 2026/27 the automatic-enrolment earnings trigger is £10,000 a year and the qualifying earnings band is £6,240 to £50,270.
In many automatic-enrolment schemes, the statutory minimum is 8% of qualifying earnings in total, with the employer paying at least 3%. Scheme rules can use a different contribution basis, so the actual payroll deduction and employer contribution should be checked against the scheme.
Review workplace-pension contribution rulesCan a household use Employment Allowance against nanny employer NI?
Usually not. GOV.UK excludes someone employed for personal, household or domestic work, such as a nanny or gardener, from an Employment Allowance claim, unless the worker falls within the separate care-and-support-worker exception.
For a standard nanny role, budget employer National Insurance without assuming the allowance will reduce it.
Check Employment Allowance eligibilityWhere the agency stops and household payroll begins
Filipino Domestic Services introduces candidates; the household remains responsible for payroll.
The current Filipino Domestic Services client terms state that, for a direct placement, the client is responsible for paying the candidate’s wages and expenses and for deducting tax, National Insurance and pension contributions where relevant.
That boundary matters when comparing an agency fee with the true cost of employment. The introduction fee is a separate commercial charge; it does not replace the household’s PAYE, National Insurance or pension responsibilities.
Review agency fees separately from employment costsOfficial sources used for the 2026/27 update.
This regulated page should be checked every April and after any Budget or rule change that alters PAYE, National Insurance or pension thresholds.
Questions about nanny tax, PAYE and NI.
What is nanny tax in the UK?
“Nanny tax” is an informal term for the PAYE and employment-tax responsibilities that can arise when a household employs a nanny. It can include Income Tax and employee National Insurance deducted from gross pay, employer National Insurance paid on top, and pension contributions where automatic-enrolment rules apply.
How much is nanny tax on a £40,000 salary?
Using simplified 2026/27 London assumptions, £40,000 gross produces £5,486 of Income Tax and £2,194.40 of employee National Insurance deducted from gross pay, plus £5,250 of employer National Insurance paid by the household. Actual payroll depends on the employee’s tax code, NI category and circumstances.
How do I calculate nanny tax?
Start with gross pay, then use the nanny’s tax code, National Insurance category, pay frequency and year-to-date data in payroll software. The software calculates employee Income Tax and NI deductions and the employer NI due on top. Pension deductions are handled separately under the scheme rules.
Do I need PAYE for a part-time nanny?
Part-time work does not automatically remove employer responsibilities or make the nanny self-employed. PAYE registration and reporting depend on the employment status, earnings and individual circumstances, so check the current HMRC rules for the engagement.
Can my nanny be self-employed and handle their own tax?
Only where the facts of the engagement genuinely support self-employment. The household should not choose the label simply to avoid PAYE. HMRC’s Check Employment Status for Tax service can be used to assess the specific working arrangement.
Does Filipino Domestic Services handle nanny payroll?
For a direct placement, the current Filipino Domestic Services client terms place responsibility for wages and relevant tax, National Insurance and pension deductions on the household. A payroll provider or suitable payroll software can be used to operate the payroll.
Set the gross salary and employer budget before making an offer.
Once the role, hours and salary are clear, compare candidate introductions and keep PAYE, employer on-costs and agency pricing as separate budget lines.