Tax Credits and Minimum wage

duncanhalley

Hi,

my friend works as a nanny and as such receives a small amount of pay which is less than the minimum wage.
The adviser on the tax credit line told her to ask for minimum wage, which is not going to happen, and only then can she claim tax credits.

I don't know the full details yet but I'm assuming the adviser classed my friend as employed. Am I right in thinking that if she was self-employed she wouldn't be eligible for the minimum wage and should therefore be able to claim tax credits?

Oldernotwiser

duncanhalley wrote: »

Hi,

my friend works as a nanny and as such receives a small amount of pay which is less than the minimum wage.
The adviser on the tax credit line told her to ask for minimum wage, which is not going to happen, and only then can she claim tax credits.

I don't know the full details yet but I'm assuming the adviser classed my friend as employed. Am I right in thinking that if she was self-employed she wouldn't be eligible for the minimum wage and should therefore be able to claim tax credits?

I believe that someone who's genuinely self employed is exempt from NMW but I doubt that someone who works regularly for one employer should be classed as self employed anyway.

I'm also wondering why someone who works as a nanny would be charging less than NMW as childcare is hard to come by; there should really be no reason for someone to be paid so little. Why do you say that it's not possible for her to get this; why can't she charge the going rate?

dmg24

Does the nanny get accom provided as part of her salary package? If so, her true 'salary' is likely to be much higher.

Oldernotwiser

dmg24 wrote: »

Does the nanny get accom provided as part of her salary package? If so, her true 'salary' is likely to be much higher.

I believe that the rate for a live in nanny, outside London and the south east, is just over £250 per week net, so still above NMW, with accommodation and food on top of this.

duncanhalley

Oldernotwiser wrote: »

I believe that the rate for a live in nanny, outside London and the south east, is just over £250 per week net, so still above NMW, with accommodation and food on top of this.

I've not seen anything like this. There's a lot of competition especially from nannies from other countries which I suppose drives the price down.

dmg24

duncanhalley wrote: »

I've not seen anything like this. There's a lot of competition especially from nannies from other countries which I suppose drives the price down.

Are you talking about a qualified nanny or an au pair? A quick Google on t'internet would support what ONW has said.

Oldernotwiser

I agree with DMG24, I think you're muddling a nanny with an au pair or childcare worker.

(I still don't see that she can be self employed as a nanny though; does she pay class 2 NICs and how does she manage her tax?)

duncanhalley

You're right, I suppose she would be classed as an au pair and is live in.

Going back to the original question, if the fact that she's live in is taken into account, this would technically increase her salary. Based on some very quick calculations, this would take her above NMW, but still make her eligible for WTC.

Does this seem feasible or would she still not be eligible for some reason?

Oldernotwiser

I found this on www.taxingnannies.co.uk

"Nanny Wages

The minimum wage does not apply to a live-in nanny who lives with the family. However where the employee has separate accommodation then the national minimum wage will apply subject to an offset of £4.46 per day for each day that accommodation is provided."

How this affects tax credits isn't clear but might be of some use to your friend.

Also relevant, from www.bluebellnannies .com

"Self-employment
With few exceptions (maternity nurses and nannies in continuous temporary employment), nannies simply do not meet HMRC criteria for self-employment. Remember if liability to pay tax is not declared to HMRC and it comes to light, it is you, the employer who will be pursued for payment, not your nanny."

Your friend can't be classed as an au pair unless she comes from abroad and she isn't eligible for tax credits (regardless of anything else) if she's under 25.

duncanhalley

Hi,

she is 26 (right on the upper limit of being an au pair I think) and from an EEU country.

Oldernotwiser

duncanhalley wrote: »

Hi,

she is 26 (right on the upper limit of being an au pair I think) and from an EEU country.

I don't mean to be rude but don't you think that it might be relevant to mention this at the start!:mad: