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Mother and father who make use of nannies might see their annual childcare payments bounce by greater than £1,000 from April beneath measures introduced on this week’s Finances.
The chancellor’s key tax-raising coverage will see employers’ nationwide insurance coverage contributions improve from 13.5 per cent to fifteen per cent subsequent yr, with the wage threshold at which employers pay contributions dropping from £9,100 to simply £5,000.
Whereas this transfer was geared toward companies, dad and mom who make use of nannies for his or her childcare preparations may also be impacted.
Jenni Bond, managing director of Nannytax, a payroll service for fogeys, mentioned the additional NI costs would add greater than £1,000 to the annual value of hiring a nanny, primarily based on the typical wage of £46,228 for nannies in London.
The extra prices could possibly be greater nonetheless, mentioned Bond, if the variety of hours the nanny was working positioned their hourly earnings under the extent of April’s new nationwide minimal wage.
Though the chancellor prolonged safety to small companies by boosting the employment allowance to allow them to offset greater payroll prices, employers of home employees together with nannies, cleaners and gardeners are exempt from utilizing it. The principles exclude employees who’re being employed in a private capability to assist the working of a family.
“The cost of childcare is astronomical, and domestic employers should absolutely be included [in the employment allowance],” mentioned Bond.
Joeli Brearley, founding father of the charity Pregnant Then Screwed which campaigns for extra inexpensive childcare, mentioned the NI improve would “hit working parents hard, particularly mothers, who still bear the brunt of childcare costs”.
“For many, employing a nanny isn’t a luxury but a necessity to keep their careers going. With this added expense, we risk pushing more parents — especially single parents and mothers — out of the workforce.”
Bond mentioned that will increase within the minimal wage, introduced on Tuesday, would additionally pile “on top of those increases parents would have expected”. The nationwide residing wage for over-21s will rise from £11.44 to £12.21 in April 2025.
199The variety of youngsters’s nurseries compelled to shut within the yr to September 2024, in response to the Nationwide Day Nurseries Affiliation
The NI hit to folks with nannies comes as dad and mom grapple with the prices of childcare after a surge in nursery closures and a push for employees to return to the workplace after the pandemic.
The yearly wage for nannies outdoors London rose by 12 per cent year-on-year to £40,326 in 2023-24, in response to Nannytax’s annual wage index report.
In London, annual salaries for nannies rose by 8 per cent to £46,228.
Within the yr to September 2024, 199 nurseries have been compelled to shut, in response to the Nationwide Day Nurseries Affiliation, a charity representing nurseries throughout the UK.
“A lot of this comes down to chronic underfunding, particularly for three and four-year-olds,” mentioned Purnima Tanuku, chief government of NDNA, in September.
The Treasury declined to remark.
