Parents who employ nannies could see their bills rise by more than £1,000 from April due to measures in this week’s Budget.
Employers of those who help run a household – such as nannies, cleaners and gardeners – are not exempt from the increase in National Insurance contributions.
Experts have suggested that the move – dubbed the nanny tax – could add more than £1,000 to the annual cost of hiring a nanny, based on the average London salary of £46,228.
At the current 13.8 per cent contributions rate at a £9,100 threshold, families would pay £5,124 per year in National Insurance. But at 15 per cent at the new £5,000 threshold, contributions would rise to £6,184.
Bills could be even higher due to the minimum wage hike, which means nannies will need to be paid more if their equivalent hourly income now falls below £12.21.
Last night the Treasury faced calls to extend the national insurance exemption to domestic employers.
Jenni Bond, managing director of Nannytax, a payroll service for parents, said: ‘The cost of childcare is astronomical, and domestic employers should absolutely be included.
‘It’s very, very difficult for families. For many families, having a nanny is a necessity because they are shift workers.
‘For shift workers, this is a real challenge because having a nanny is one of the only options for them.’
Affordable childcare campaign group Pregnant Then Screwed said Ms Reeves’ National Insurance hike would ‘hit working parents hard, particularly mothers, who still bear the brunt of childcare costs.’
Founder Joeli Brearley said it risks ‘pushing more parents – especially single parents and mothers – out of the workforce.’
The Chancellor pledged £1.8billion for the expansion of government-funded childcare in the next financial year, but there are fears over a lack of providers in the sector.
Data from Ofsted earlier this year showed the number falling by 11.5 per cent between 2021 and 2023. In the year to September 2024, 199 nurseries were forced to close, according to the National Day Nurseries Association
During the election campaign, Labour pledged to match the Tory plan to give working parents 30 hours of free childcare from next September.