BIG changes in the way Nanny payroll is reported to HMRC are on their way in April.
At the moment, parents only inform HMRC of the payments and deductions they’ve made to their Nanny at the end of the tax year when they submit the dreaded end of year return in April or May.
From April 2013, Nanny Employers will be required to submit a report to HMRC EVERY TIME a payment is made to their Nanny, on or before the pay day. This new reporting process is known as “Real Time Information” or RTI.
What is RTI?
Real Time Information is the new system of reporting PAYE for individuals. It will replace the need to submit an end of year return at the end of the tax year (although your Nanny will still need a P60 and the payments over the year will need to be checked and finalised each April).
What does it mean to Nanny Employers?
The major change will be reporting to HMRC each time you run your payroll. This will be in the form of a “Full Payment Submission” (FPS). This HAS to be done via the internet using compatible payroll software. If you use payroll software at the moment, you will need to check that it will be RTI compatible from April.
If you currently process your payroll by hand, you will need to implement a computer payroll package (or seek the help of a Payroll Bureau to help).
What will be involved for Parents Employing a Nanny?
The data required by HMRC means that you must ensure your payroll records are full and up to date. Each Nanny’s records MUST state:
- Their FULL name in the correct order. No initials, abbreviations or “known as” names and it must be spelt correctly.
- The date of birth in format date/month/full year (eg. 05/06/1975).
- National Insurance Number in the correct full format – 2 letters, 6 digits and a final letter (A B C or D). ALWAYS verify the number from an official document (letter from tax office etc). Having the correct NINO for your Nanny will be more
important than ever!
- Full Address including post code.
Before you submit your first RTI submission, you will need to submit an “Employer Alignment Submission” (EAS) to HMRC with all of your payroll record details. From this they will be able to match their records to yours for your Nanny and make sure everything is up to date.
You will need to keep records of the hours your Nanny works each week to enable you to inform HMRC. This information will be used for those Nannies who are claiming benefits and tax credits. There will be 4 bands for the hours worked:
Up to 15.99 hours
16 – 29.99 hours
Over 30 hours
HMRC will be expecting the correct amount of PAYE to be paid when it is due. There will be no “paying a bit now and adding some on to next month” or “sorting it all out at the end of the year”. Penalties for late/incorrect payment will apply, as will they where the Full Payment Submission is late or possibly if it contains errors*. (*HMRC are yet to confirm the figures and conditions of these penalties)
What does RTI mean for Nannies?
RTI should be of benefit for many Nannies in that:
- Any tax code issues can be identified and corrected promptly.
- For those Nannies receiving benefits and tax credits (in time, most of which will be transferred to the Universal Credit), having information on their earnings when they are paid to them will help them receive the correct amount of benefit and
- RTI will not affect the way deductions are made from their pay. They will still receive a P45 should the employment end and a P60 at the end of the tax year.
Can Nanny Employers do anything about this now to prepare?
- Ensure your payroll software will be RTI compliant from April. If you do not use payroll software and do not outsource your payroll, look for RTI compliant payroll software and become familiar with how to use it before April. (Alternatively you
could look into outsourcing your payroll and take this pressure off!)
- If you use an Accountant or Payroll Bureau, check that their system will support RTI.
- Check your Nanny’s payroll records are complete and up to date.
For more information please visit:
Or contact Claire at Zest Payroll Solutions with any questions.
© Zest Payroll Solutions January 2013