Until last Wednesday, parents using the services of a nanny via a limited company structure were able to avoid paying employers' and employees'
national insurance contributions and income tax on the nanny's salary. The scheme, which required the nanny to become a director of the limited company and pay tax on a self-assessment basis, enabled some parents to save as much as 8,000 a year, but it affected such employment rights as protection against unfair dismissal.
Stephen Vahrman, managing director of payroll service Nannytax, welcomed the move. He said, 'These arrangements were never a suitable vehicle for the employer-employee relationship between parents and nannies and their use could potentially have ended in serious disputes. But because of the cost savings involved, some parents were pressuring their nannies into using them, whether they were happy to or not. We think it's good for the working relationship that they have now been closed.'
Other measures announced in the Budget included a commitment to review how childcare can best support the drive to end child poverty in the lead-up to the next spending review in 2005.
This was welcomed by the Kids' Clubs Network, whose director Anne Longfield said, 'Childcare is seen as relevant to all sorts of policy areas, not just as an add-on, which is very good news in terms of its profile.
'The interdepartmental childcare review drew up a ten-year plan for childcare, of which only the first three years have been costed. We now need to see a significant leap forward in the next spending review to increase the availability of childcare.'
The Budget set rises in the national minimum wage from this October to Pounds 4.50 for adults and 3.80 for youth workers and those in approved training. Further increases to 4.85 and 4.10 respectively will follow from October 2004, subject to a review by the Low Pay Commission.
The Chancellor said the design of the Child and Working Tax Credits, available from this month, would give families more choice in how they organise their work and caring responsibilities.
