How to Handle Nanny Expenses, Meals, and Accommodation

As an employer, you must reimburse your nanny for all work-related expenses (like activity fees or mileage). Meals are a common perk but not a legal right, though providing them for a live-in nanny is standard. For accommodation, you must pay your live-in nanny the National Minimum Wage, but you can legally deduct a small, fixed "accommodation offset" from their pay.

When you're figuring out how much a nanny will cost, the gross salary is only part of the picture. You also need to agree on how you'll handle the day-to-day costs: Who pays for the museum ticket? What's the plan for lunch? What about accommodation?

Getting these details clear from day one is the key to a happy, professional relationship. It's all about avoiding awkward chats about money down the line.

1. Nanny Expenses (Work-Related Costs)

This is the most straightforward category. Any money your nanny spends while doing their job is a work-related expense. You, the employer, must cover these costs.

These expenses are reimbursements, not wages. They are not taxed.

Common examples include:

• Entry fees for playgroups, museums, or soft play
• Tickets for public transport (bus or train fares with the children)
• Art and craft supplies
• Lunches or snacks bought for the children while out
• Ingredients for batch-cooking for the children

Your nanny should not be out of pocket for doing their job.

How to Handle Reimbursements

You have two main options, and you should agree on one in the contract:

1. A "Kitty" (Petty Cash): You give your nanny a set amount of cash (e.g., £40) in a pot or a pre-paid card at the start of the week. They use this for all expenses and provide receipts.
2. Weekly Reimbursement: The nanny pays for expenses themselves, gives you the receipts at the end of the week, and you pay them back (either in cash or via bank transfer).

What About Mileage?

If your nanny uses their own car for the job (e.g., school runs, driving to activities), you must reimburse them for the mileage. You should not pay for their fuel—that's what a mileage allowance is for.

• The HMRC-approved rate is 45p per mile (for the first 10,000 miles per year). This tax-free rate is designed to cover fuel, insurance, and wear and tear on their car.
• Important: You do not pay for their commute to and from your house. That is their own personal cost.

2. Meals on Duty

This is a common question. Legally, you are not required to provide your nanny with meals (unless you have a live-in nanny, where it is expected).

However, it is a very common and much-appreciated perk.

Most families agree on one of these options:

• The nanny is welcome to eat the same food they prepare for the children.
• The nanny can reasonably use your kitchen and food to prepare their own lunch.
• The nanny is expected to bring their own packed lunch.

There is no right or wrong answer, but clarity is essential. Be upfront about it during the interview. It's an uncomfortable thing to be unsure about, so set a clear policy. Providing meals is a simple way to make your nanny feel welcome and valued.

Under HMRC rules, providing reasonable free meals in a workplace (your home) is generally not a taxable benefit.

3. Accommodation (Live-in Nannies)

This is the most legally complex area. If you are hiring a live-in nanny, you are providing them with accommodation as part of their job.

Here are the key rules:

• You must pay the National Minimum Wage (NMW): This is non-negotiable. You cannot "pay" your nanny with just a room. They must receive a salary that, when divided by their hours worked, is at or above the National Minimum Wage or National Living Wage.
• You can make a deduction: To account for the benefit of the room, the government allows you to deduct a specific, fixed amount from their pay. This is called the accommodation offset.

The accommodation offset rate (from April 2024) is £9.99 per day (£69.93 per week). This is the maximum you can deduct from their pay, even if you think the room is worth more. You cannot charge them extra for utility bills, Wi-Fi, or council tax.

This is a key calculation when determining your nanny's gross salary.

Calculator: Our Nanny Salary Calculator can help you budget for a live-in nanny, factoring in the accommodation offset.

The Golden Rule: Put It in the Contract

To prevent any confusion, your nanny's employment contract must clearly state:

• The policy for work-related expenses.
• The mileage rate for using their car.
• The arrangement for meals.
• The details of the accommodation (for live-in nannies).

How This Affects Payroll

How do you separate your nanny's taxable salary from their non-taxable expense reimbursements?

This is a core part of running payroll. A nanny's payslip must show their taxable pay, but it can also include reimbursements, which are not taxed.

Our payroll service takes care of everything for you. We make it simple to run your payroll, factoring in any accommodation offsets and ensuring non-taxable reimbursements are handled correctly. We provide clear, legal payslips that show the full breakdown.

Fully digital, no paperwork, no stress.