Cash in hand

Question: If I'm paying a cleaner for four hours a week at the minimum wage, can I just pay them cash in hand without having to take into account tax and NI?

Answer: As an employer you have a legal obligation to operate PAYE on the payments you make to your employees if their earnings reach the National Insurance Lower Earnings Limit (LEL). For the tax year 2018-19 this is £116 a week. You use the employee’s tax code and National Insurance category letter to work out how much Income Tax and NICs to deduct from their pay and how much Employer’s Class 1 NICs you owe on their earnings. By the 19th of each month – or by the 22nd if you make electronic payments – HMRC must have received the amounts owed. You may be able to send the amounts due every quarter if your average monthly payments are likely to be less than £1,500.

From what you say the earnings in this case are approximately £24 per week. So, provided the cleaner has no other earnings there will be no requirement to deduce tax and NIC contributions.

If the cleaner has other earnings you should check with HMRC whether you need to operate a payroll scheme and register as an employer with HMRC. If you are a limited company with less than 10 directors all the forms and information you’ll need to operate PAYE can be done online.

Further information is available on the HMRC website.

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