Paying Tax For an Au Pair

The question of whether you need to pay tax for your au pair rests on whether you are acting as an Employer or not.

Technically, au pairs fall into an entirely different category of childcare help from any other type in that they are exempt from employment law. As such, the family is neither acting as their employer nor is the au pair an employee – and so therefore are not subject to being taxed.

However, there is an added complication in that the issue of tax and employer status is bound up with the amount of weekly money an au pair is being paid.

Minimum Earnings

The Home Office currently lays down guidance notes that state an au pair should be paid a minimum of £60 per week for working up to 25 hours work, but that if they are paid ‘significantly’ more, they will be deemed to be a domestic worker and therefore cross the boundary from au pair to employee - in which case they would be liable for tax and national insurance.

The current lower threshold for earnings is £90 per week. This means that if you are paying your ‘au pair’ more than £100 per week, you will have crossed the lower PAYE minimum threshold and could be deemed to have become an ‘employer’ and therefore duty-bound to notify the HM Revenue.

The Government admit, however, this is a currently a grey area, and one which they are working to clarify - but it would be wise to check with the Revenue (HMRC) as to your status and adhere to the standard regulations if you don’t want to fall foul to a heavy fine.

Estimates as to the numbers of EU nationals who are able to work in the UK, but who are illegally employed, are high and the government are keen to ‘clean up’ this issue.

Being an Employer

If you are hiring a nanny, you are automatically classed as an Employer and they are the Employee. You will therefore be liable for tax and insurance for your nanny as well as all related contractual obligations the law requires.

Claiming Help with Tax

The government is able to help cover the cost of childcare if your income is under a certain amount, you are working over 16 hours per week, and you are using an approved childcare provider as defined by HMRC (HM Revenue and Customs).

The scheme is called the Childcare Tax Credit - part of the Working Families Tax Credit - and payments are calculated by working out the cost of annual childcare to parents and dividing it by the number of weeks in a year to provide a set amount per week.

Some agencies are able to help register an au pair as an approved child-care provider whilst they are working in the UK. The benefit of this, then, is that if your au pair is registered, you could be entitled to receive up to 70-80% of the cost of hosting your au pair as a tax break from the government, or else be able to apply for childcare vouchers if your company provides them.

A Cautionary Note

The most important thing to bear in mind is to always check the credentials of the person you are hiring or hosting, and if in doubt as to their employment status, seek professional advice.

If you take on an illegal immigrant – whether deliberately or in complete ignorance - you will be held personally responsible. And if you are providing accommodation for that person, you could be deemed to be ‘harbouring’, which is regarded as a more serious offence for which imprisonment is a possibility.