Nanny Share Tax and Childcare Costs: What Two Families Need to Know in 2026/27
Splitting a nanny between two families changes who employs the nanny, how PAYE works, and how Tax-Free Childcare applies to each family. The nanny-share tax mechanics for 2026/27.
Quick answer
A nanny share doesn't create special tax rules — it just means two families need to agree, in advance, whether they're running one joint PAYE scheme together or each separately employing the nanny for their own hours. Get that structural decision right first, because it determines how pay, tax code allocation, employer National Insurance and pension auto-enrolment all work.
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Childcare cost calculatorJoint employer vs separate employment
The two common models are:
- Joint employer — both families are named as joint employers on one combined PAYE scheme, splitting the nanny's total gross pay, tax, National Insurance and pension contributions between them by agreement (often proportional to hours or number of children). The nanny receives one payslip covering the combined arrangement.
- Separate employment — each family employs the nanny only for their own agreed hours, as two genuinely distinct part-time jobs, each with its own PAYE scheme and payslip.
Joint-employer schemes are more common in practice because they treat the nanny as having one job, simplifying tax code allocation and often working out more favourably for National Insurance, since it's calculated on the combined earnings in one go rather than split across two separate employments.
Tax-Free Childcare for each family
Each family opens its own Tax-Free Childcare account for its own child and can pay its agreed share of the nanny's fees into that account, receiving the government top-up (20p for every 80p paid in, up to the relevant annual cap per child) — provided the nanny is registered with a childcare regulator (Ofsted in England, or the equivalent elsewhere) as a condition of qualifying.
uk-childcare-tax-free-account-complete-guide-2026Tax code allocation under separate employment
If the families run separate PAYE schemes rather than a joint one, the nanny effectively has two jobs. HMRC will normally allocate the Personal Allowance to one employment, taxing the other from the first pound (a BR-type code) — worth checking via the Personal Tax Account to avoid over- or under-deduction, especially in the first months of a new nanny-share arrangement.
Bottom line
Decide the employment structure before the nanny starts, not after — a joint-employer scheme is usually simpler, and getting Tax-Free Childcare and PAYE set up correctly from day one avoids a messy unwind later.
Sources
- GOV.UK: Employing someone to work in your home
- GOV.UK: Tax-Free Childcare
Frequently asked questions
Who is the nanny's employer in a nanny share?
There are two common structures: either both families are joint employers on one PAYE scheme (splitting the nanny's pay and employer costs by agreement), or each family separately employs the nanny for their own hours, treating it as two separate part-time jobs. The joint-employer model is more common and usually simpler to administer.
Does each family still need to register as an employer?
In a joint-employer nanny share, typically one combined PAYE scheme is registered, with both families' contributions to gross pay and employer National Insurance agreed and split between them, often via a specialist nanny payroll provider. In a separate-employment model, each family would run its own PAYE scheme for its own portion of hours.
Can both families claim Tax-Free Childcare for the same nanny?
Yes — each family can separately open a Tax-Free Childcare account for their own child and receive the government top-up (20% up to the relevant cap) on payments made from that account towards their own share of the nanny's fees, provided the nanny is a registered childcare provider.
Does the nanny pay more tax by working for two families instead of one?
Not automatically — National Insurance and Income Tax are based on total earnings, however they're structured. In a joint-employer scheme with one combined payslip, the nanny is taxed as if working one job. Under a separate-employment model with two payslips, the nanny's Personal Allowance would typically be allocated to only one job, with the other taxed from the first pound — correct code allocation matters here.
Who's responsible for employer National Insurance and pension auto-enrolment in a nanny share?
Whichever structure is used, an employer (or the combined joint-employer scheme) is responsible for employer National Insurance above the secondary threshold and for auto-enrolment duties once the nanny meets the qualifying earnings criteria — a specialist nanny payroll service can simplify splitting these obligations fairly between two families.
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