Khalid Sadur is the CEO and Managing Director of KMKS Consultancy, a UK-based independent tax consulting company. Khalid has over 20 years’ experience working for the ‘Big Four’ accountancy firms as well as FTSE 100 organisations.
Here are Khalid Sadur’s 3 pointers for carers when handling taxes and declarations:
1. Pay the right amount of tax
Caregivers can choose to be either employed or self-employed in providing their services:
Self-employed individuals will be required to pay income tax and additional Class 2 and/or Class 4 National Insurance Contributions (NICs) which are calculated and paid through an annual self-assessment return.
Employed individuals will have both tax and NICs deducted at source from your gross pay by your employer.
2. Declare expenses
If you are self-employed as a caregiver, this means you will be taxed on a profit associated with your self-employment.
By not declaring expenses, this will unnecessarily increase profits chargeable to tax and will lead to a higher overall tax liability.
A record of expenses incurred should be retained and these can be claimed on a Self-Assessment Tax return when filed with HMRC.
3. Receiving cash payments
Any payment made to a caregiver (be it cash or otherwise) will need to be accounted for as employment income and the correct deductions will have to be made by the employer for income tax and NICs through an established payroll.
The information contained in the above article is general in nature, does not take into account your personal situation and should not be relied upon in place of appropriate professional advice. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a tax accountant.