The UK is currently experiencing a shortage of homecare workers, with some estimates suggesting that 15% of posts in this sector are vacant. So, if you’ve ever thought about becoming an at-home carer for an elderly person, there’s no better time to make the leap into this challenging, demanding and yet ultimately satisfying profession. That said, there are a few things to bear in mind—not least from a tax perspective.
Setting up as self-employed
When you’re working as a carer on a freelance basis, you’ve got to make sure the taxman is aware of this. To become officially self-employed, you need to register for self-assessment (i.e., tell the government you’ll be reporting your own income) and for something called “Class 2 National Insurance”—more on that later! For both these things, you’ll need to provide the UK tax office, known as HMRC, with some information. The most important thing is your National Insurance number (or NI number, for short). You should have received this automatically from the government when you turned 16, but if you’ve misplaced it, there are various ways to find it.
Writing your contract
No matter whether you’re working full-time or part-time, it’s wise to draw up a written contract setting out the details of your care work. This should detail things like your working hours, any specific requirements and your rates. As a self-employed carer, the national minimum wage—currently £9.50 an hour—does not apply to you, so it’s important to clarify your rate of pay ahead of time. This helps avoid any nasty surprises down the line, both for you and the elderly person you’re caring for.
Drawing up invoices
Regardless of whether the person you’re caring for pays you in cash or via bank transfer, you should draw up a written invoice for them every month. Each invoice should contain various pieces of information, like your address, your bank details, and how much they need to pay. Don’t forget to include how long the payment deadline is—if you don’t specify this, a default payment term of 30 days will apply.
Handling your payments
You’ve worked hard, you’ve been paid… job done? Not quite. You’ve still got to pay your tax bill at the end of year—so make sure you put some money aside for this. The UK government has put together a handy calculator to give you an idea of what you’ll owe. Over the course of the year, make sure keep a record of all your income and expenses: you can offset any work-related costs from your taxes.
Filing your tax return
Because your tax isn’t being automatically deducted from your pay, you need to file your own tax return if you’re a self-employed carer. Bear in mind that the UK tax year runs from 6 April to 5 April, with the deadline for filing your return being 31 January of the following year. But how do you actually file your return? The easiest way to do it is online. Once you’ve reported all your figures, HMRC will calculate your tax bill for you. This comprises two main elements:
Income tax
Every worker in the UK has to pay income tax—including self-employed carers looking after the elderly. However, everyone also gets a personal allowance of £12,570: in other words, you do not have to pay income tax on this amount. Once you earn more than this, you will pay income tax at a staggered rate. For instance, you will pay 20% income tax on amounts between £12,570 and £50,270, where the rate rises again.
National Insurance
Alongside income tax, you also need to pay National Insurance (NI) contributions, which go towards your pension in later life. A different set of thresholds and rates, known as Classes, applies for NI. Because you’re performing your care work on a self-employed basis, you’ll pay either Class 2 or Class 4 rates, depending on how much you’re making. This means you could be paying anything from £3.15 a week to 9.73% of your profits—so it’s worth using the government’s calculator to get a clearer picture.
Paying your tax bill
Once you’ve submitted your tax return, HMRC tells you how much you owe. It also estimates how much you’ll need to pay for the current year and asks for a contribution towards this so you won’t be caught short—known as a payment on account. Any tax you owe from the previous tax year must be paid by 31 January, along with your first payment on account for the current year, while your second payment on account is due by 31 July. You can pay your tax bill however it suits you best, be it by bank transfer, debit card, or even cheque.
Ready for your first day of work?
So, your contract is signed, you’re registered as self-employed and you can’t wait to start your new position working as a carer for the elderly. But don’t forget to take as good care of your taxes as you do your patients: as a self-employed carer, you’re responsible for managing your own tax affairs. Keep thorough records—and don’t forget to send off your tax return by 31 January each year!