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The average gross salary for a daily nanny in central London — one who lives outside the family home — jumped by 4% to £28,171 last year, according to Nannytax, a payroll service.
That means daily nannies in the capital are taking home £399 a week after their tax and national-insurance contributions (Nics) — more than some teachers and nurses.
If you have a spare room at home, a live-in nanny could be cheaper. They earn an average of £21,573 in central London — or a net £314 a week.
The true cost of hiring a nanny is even higher because parents must pay employer’s Nics on top of their nanny’s salary. For a nanny on £28,171, the employer’s Nics would be £2,979 — a total of £31,150.
And parents pay their nannies out of income that has already been subject to tax and national insurance. They therefore need a gross income of £43,805 to cover nanny costs of £31,150, according to Nannytax.
However, many families do not realise that they could knock up to £2,132 off the cost of a nanny — or of childcare in general — by using the government’s childcare-vouchers scheme. Only 38% of parents who approached nanny agencies last year inquired about the scheme.
Asa Nilsdotter at the payroll firm said: “Families with nannies have been penalised by the tax system for far too long. The voucher scheme goes some way to redressing the balance, but it is not widely publicised.
“The government has focused instead on help with childcare costs through tax credits, but this is of little use to families with nannies because you need a household income of less than £59,000 to qualify. The voucher scheme, however, is open to everybody regardless of income.”
Under the scheme, working parents can escape tax and Nics on earnings of up to £50 a week — £2,600 a year — if their employer offers vouchers that are put towards the cost of government-approved childcare, including nannies.
The tax relief would be worth £1,066 to a higher-rate taxpayer and £858 at the basic rate. Both parents can claim the relief, so a family with two higher-rate taxpayers could save £2,132 (see below for more details).
Self-employed people are not eligible and many smaller companies do not offer the scheme.
Rose Catt, 35, a partwork editor from Highgate in north London, would love to get childcare vouchers towards the cost of her nanny, but she works for a small firm. She said: “Childcare in London has become so expensive that tax breaks would be a real help, but I tend to work for smaller employers who do not even offer pensions.”
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