UK Nanny Payslip: PAYE, NI and Real Cost Explained
If you employ a nanny in the UK, you’re a household employer. That means a proper itemised payslip every pay period, plus PAYE, employer National Insurance, and usually pension on top of her wage. This guide covers what belongs on a nanny payslip, what it really costs you, and how most UK families run nanny payroll without spending their weekends filing with HMRC.
You hire a nanny. She picks up the kids, makes their tea, holds the fort while you finish work. At the end of every month, you owe her a UK nanny payslip, not just a bank transfer with a polite reference. Most first-time nanny employers don’t realise this until HMRC reminds them.
Being a household employer makes you, legally, the same kind of employer as a small business. You have to register with HMRC, run PAYE, file pension contributions where required, and give your nanny a payslip she can present to a mortgage lender. This guide walks through what goes on that payslip, what extra costs sit on top of her hourly rate, and the practical options for handling it all.
Is your nanny an employee or self-employed?
In nearly every UK household arrangement, your nanny is your employee, not self-employed. HMRC’s employment status tests look at who controls when she works, whether she can send a substitute, and who provides the tools. A nanny working set hours in your home almost always passes the employee test.
This matters because employee status triggers everything else: PAYE, employer National Insurance, holiday pay, sick pay, pension auto-enrolment. If you’ve been treating your nanny as self-employed, you’ve been getting it wrong, and the risk lands on you, not her.
HMRC investigates these arrangements often, usually when a relationship breaks down or the nanny later claims benefits. You can read HMRC’s employment status checker for the full criteria, but the short version is simple. If you tell her when to show up, where to work, and what to do, she’s an employee.
What should appear on a UK nanny payslip?
A nanny payslip must show her gross pay, Income Tax (PAYE), employee National Insurance, any pension contribution, student loan if applicable, and net pay. It also needs year-to-date totals, your employer reference, the pay period dates, and her tax code. Employer NI and your pension contribution are tracked separately.
By law, every UK employee gets an itemised payslip on or before payday (gov.uk on payslip rights). For your nanny that means:
- Gross pay: hours worked at her gross hourly rate, plus any holiday or sick pay.
- Income Tax (PAYE): deducted using her current tax code.
- Employee National Insurance: her Class 1 contribution.
- Pension contribution: if she’s auto-enrolled.
- Student loan repayment: if she’s repaying one.
- Net pay: what lands in her bank account.
- Year-to-date totals for tax and NI paid so far this tax year.
- Tax code, NI number, employer reference, and pay period dates.
You also need to track, separately, the employer National Insurance and employer pension contribution you owe HMRC and the pension provider. These aren’t deducted from her wage; they’re an extra cost on top.
How much does a nanny actually cost on top of her wage?
Budget roughly 15 to 20 percent on top of your nanny’s gross wage. The extras are employer National Insurance, employer pension contributions, accrued holiday pay (5.6 weeks minimum), and a payroll service fee. Statutory Sick Pay also applies when she meets the qualifying conditions.
Take a £15/hour gross nanny working 40 hours a week. Her gross wage is around £31,200 a year. On top of that, expect:
- Employer NI, due on earnings above the secondary threshold.
- Employer pension of 3 percent of qualifying earnings if she’s auto-enrolled (gov.uk on workplace pensions).
- Holiday pay of 5.6 weeks per year minimum, pro-rated for part-time hours (gov.uk on holiday entitlement).
- Statutory Sick Pay when she meets the qualifying conditions (gov.uk on SSP).
- Payroll service: most families use Nannytax, NannyPaye, or similar, at roughly £10 to £15 a month.
Tax rates and thresholds change every April. Always check the current numbers at gov.uk on National Minimum Wage before agreeing a rate. Her net wage can never fall below the legal minimum for her age band. If you want a fuller cost picture before you hire, run the numbers on our UK nanny cost calculator.
Gross vs net: why you should always agree gross
The single rule that catches out first-time nanny employers: agree the wage in gross, not net.
A net agreement means you promise her a fixed take-home figure. Every time HMRC changes her tax code, adjusts a threshold, or starts deducting a student loan, the gross cost lands on you. Your nanny’s life stays the same. Your bill goes up.
A gross agreement is how every other UK employee is paid. Her take-home moves with her tax code; your cost stays steady. It’s the standard practice, and any good payroll service will push you towards it.
Why this matters
You agree £13/hour net. Six months later, HMRC issues your nanny a new tax code with a smaller personal allowance. The gross cost of that £13/hour jumps by about £1.50/hour, and you pay the difference. With a £15/hour gross rate, the same tax-code change means her take-home drops a little. Your cost holds steady.
Three ways to run nanny payroll
A dedicated nanny payroll service
The path of least resistance. You send the service your nanny’s hours each month. They produce the payslip, file the Full Payment Submission with HMRC, manage tax-code changes, and handle pension contributions. You just pay your nanny and pay HMRC the amounts they tell you. Most UK nanny employers use Nannytax, NannyPaye, or PayrollForNannies. Budget around £10 to £15 a month.
HMRC’s Basic PAYE Tools
Free software from HMRC. It works, but it’s a chore. You input the hours, calculate the deductions, generate the payslip yourself, and file the FPS every month. Sensible only if you enjoy admin or want to learn how PAYE works under the bonnet.
Pay her cash and hope
Not a real option. HMRC investigates household-employer arrangements often, usually when a relationship sours or your nanny later claims benefits. When they do, you become personally liable for unpaid tax, NI, and penalties going back years. Don’t do this.
What records do I need to keep for nanny payroll?
Keep hours worked, gross pay, deductions, and net pay for at least three years after the end of the tax year they relate to. HMRC can request these in an investigation. Most payroll services store the data for you, but you should keep your own backup of the hours your nanny worked each month.
The hours your nanny worked are the foundation of everything else. Her payslip, your FPS, the payroll service charge, the pension contribution: all of it depends on accurate hours. Most UK families spend the last evening of every month scrolling through WhatsApp messages, decoding voice notes, and trying to remember which day last week the school had an inset.
There’s a better way. hōra turns your nanny’s WhatsApp messages into a clean monthly report, with split-rate calculations done and the original messages kept as backup. Your payroll service gets accurate hours every month, and you get your weekend back. If you’re still on a spreadsheet, our guide on how to track nanny hours without spreadsheets walks through why that approach breaks down.
Stop scrolling WhatsApp for the hours.
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Try for free →Common nanny payroll mistakes to avoid
Paying her gross, then forgetting to file PAYE. The wage transfer is the easy part. The HMRC submission is the part that matters. Always use a payroll service or HMRC’s Basic Tools, and file on time every month.
Skipping pension auto-enrolment. If your nanny is 22 or older and earns over the trigger threshold, she’s eligible for a workplace pension. You have to enrol her unless she actively opts out. The Pensions Regulator sends letters, and ignoring them gets expensive.
Treating holiday pay as optional. It isn’t. She accrues 5.6 weeks per year, including bank holidays. If she leaves before using it, you pay it out.
Combining accounts. Your personal bank account isn’t a payroll system. Keep her wage transfers traceable, with the right reference, in case HMRC ever asks.
Forgetting Tax-Free Childcare. Most working families employing a nanny qualify for up to £2,000 per child per year in government top-ups. Read our Tax-Free Childcare guide for nannies for the eligibility rules and the Ofsted step.
Running nanny payroll in the UK is genuinely simple once you accept the structure: register with HMRC, use a payroll service, agree the wage in gross, and keep clear records of the hours. The whole setup takes about 30 minutes, and a few minutes a month after that.
The piece that still needs attention is the hours. Get those right and the rest of the payroll chain works on its own. Get them wrong, and every payslip carries the error. Try hōra free to capture your nanny’s hours by WhatsApp and feed payroll a clean monthly report.
Frequently Asked Questions
Do I have to give my nanny a payslip in the UK?
Yes. By law, every UK employee, including a nanny, must receive an itemised payslip on or before payday. A bank transfer with a payment reference isn’t enough. The payslip has to show gross pay, deductions, and net pay.
Can I pay my nanny cash in hand in the UK?
You can pay her in cash, but you still owe HMRC her income tax and National Insurance, and you still have to file PAYE. Cash payment without payroll is illegal and triggers backdated tax, NI, and penalties when HMRC catches up.
What’s the difference between gross and net nanny pay?
Gross pay is the figure you agree before tax and NI deductions. Net pay is what lands in her bank account. Always agree a gross figure. It protects you from tax code changes, student loans, and threshold adjustments that would otherwise raise your cost.
Do I have to pay my nanny when she’s on holiday?
Yes. UK employees accrue 5.6 weeks of paid holiday a year, including the eight bank holidays, pro-rated for part-time hours. The pay is based on her usual earnings, including any regular overtime.
How long do I need to keep nanny payroll records?
Keep records for at least three years after the end of the tax year they relate to. HMRC can request payroll records during an investigation. Most payroll services store the data for you, but back up the hours yourself.