Providing a Car for a Nanny

Fewer and fewer employers are providing a car for a nanny for her exclusive use and PAYE for Nannies would suggest that the alternatives are considered carefully before any decision is made to provide a car for a nanny to ensure an unexpected nanny tax charge is not incurred.

The tax which becomes payable on such a benefit to a nanny is very high these days and is directly related to the value of the car and the official estimate of it's CO2 emissions. If ANY fuel is provided for private use, a further tax charge is made for this.

If the employer is paying the nanny a net wage, rather than a gross wage, then the burden of all this tax will fall not on the nanny but on the employer, and can amount to many thousands of pounds per annum

Even if a car is normally used for "business purposes" such as ferrying the children about during the day, if the nanny has exclusive use of it and can take it home at night, it will generally be regarded as a "Company Car" and taxed as such.

One way to avoid additional nanny tax charges is to ensure the car is used only for business purposes, is not dedicated to the nanny's exclusive use and is not taken home by the nanny at night. (Travel between the nanny's home to her place of work is considered private use.)

Alternatively, the employer can ask the nanny to use her own car for transporting the children and a mileage payment of up to 40p per mile can be made for "Business Miles" without incurring any further tax charge, provided a detailed record is kept of such payments.