Understanding PAYE

Paying Tax, National Insurance & Pension Contribution

Your employer is legally obligated to make Tax, National Insurance and Pension contributions, on your behalf. Just as you are legally bound to ensure that they do so.

The Tax, National Insurance and Pension deductions from your wages must be paid to the government on your behalf. This includes Nanny Tax, Housekeeper Tax, Butler Tax, House Manager Tax, Chauffeur Tax etc...

How does it work? The basics.

• All employees in the UK are obliged to contribute financially to the state through Pay As You Earn (PAYE).
• Domestic Staff Tax and National Insurance is deducted every time your employer pays you throughout the year.
• The employer is responsible for making those deductions and paying what they have collected to HMRC on your behalf.

Employee’s Responsibilities 

• Ensure that you are registered under a PAYE scheme.
• Request a pay slip and keep a record of your payslips every time that you are paid.
• A payslip will show how much Tax and NI your employer is paying to HMRC on your behalf, as well as your individual tax code, pension contributions and net (take home) pay.
• Important: Never assume that tax is automatically being paid by your employer, especially if regular pay slips are not being issued. Many domestic staff have fallen foul due to this and have experienced difficulties as a result. Many employers have been heavily fined.

Employer's Responsibilities

• The employers are responsible for operating a PAYE scheme on your behalf.
• The employers deduct Tax and National Insurance you owe to the government from your gross earnings.
• The employers pay the deducted amount to HMRC.
• The employers are responsible for paying a minimum of 3% of your earnings in to a pension scheme.

The Danger of NOT PAYING Domestic Staff TAX

It is considered a criminal offence to not pay the correct amount of Tax and National Insurance. If caught, both an employer and yourself could face a series of penalties. These may include:

• Repayments of any unpaid Tax and NI to HMRC including interest.
• Potential fines for lack of payments and also lack of RTI information.
• Criminal investigation with a risk of prosecution and imprisonment.

Cash Payments

While 'cash in hand' may seem simple and easy in the short term, it can create long term difficulties for the following Statutory rights;

• Pension
• Sick Pay
• Maternity Pay
• Redundancy
• Applying for a mortgage or loan as lenders require proof of earnings

Perfect Household Staff Offer the following to employees and employers:

1. We ensure that you have the right to work in the UK. 

The complete candidate document package will be submitted to the employer following your acceptance of a job.

2. Negotiate a gross salary with your employer.

Many Candidates such as yourself, want a net salary but we recommend agreeing a gross for numerous reasons. We can negotiate this on your behalf.

3. Clearly explain and break down of your salary.

Your gross salary will include both gross and net wage, your National Insurance payments, and Pension Contributions.

4. Provide you with a contract template which you can offer your employer.

Perfect Household Staff offer a bespoke tailored contract of employment.

Employing Domestic Staff 

To see a wider range of Household Staff such as butlers, chauffeurs, chefs, personal assistant, etc... please click on the link - Household Staff for Hire

To find Specialist Childcare Services, please click on the link - Specialist Childcare Services

Our Residence & Estate Management services are found on this link - Residence & Estate Management