If you employ a nanny directly, you are legally their employer — in the same way a business is an employer to its staff. That comes with specific obligations most families haven’t dealt with before.

Registering as an employer

Before your nanny’s first payday, you need to register as an employer with HMRC and set up a PAYE (Pay As You Earn) scheme. This is what allows you to deduct and report tax and National Insurance correctly.

What PAYE actually involves

• Deducting Income Tax and Employee National Insurance from your nanny’s pay
• Paying Employer’s National Insurance on top of their salary
• Submitting reports to HMRC every time you pay them (known as Real Time Information)
• Issuing payslips each pay period

Minimum wage compliance

Your nanny must be paid at least the current National Minimum Wage (or National Living Wage, depending on age) for every hour worked — including any additional hours beyond their contracted schedule. Rates change periodically, so always check the current figure on gov.uk rather than relying on a number you saw a while ago.

Doing it yourself vs using a specialist

Some families manage payroll themselves through HMRC’s free tools. Many more use a dedicated nanny payroll service, which handles registration, monthly calculations, payslips and year-end reporting for a modest monthly fee — usually worth it for the time saved and the peace of mind.

Getting payroll right isn’t just about compliance — it protects your nanny’s entitlements, and protects you if anything is ever queried.