When life becomes more difficult and the activities of daily living become more testing, rather than going into care, many people choose to employ a carer to enable them to remain living in their own home. This decision usually arises after an assessment by Social Services and you may need a carer or personal assistant for just a few hours or maybe full time depending upon your assessed needs but the carer’s job is to assist you to lead as independent a life as possible.
Employing a carer or personal assistant, whether funded through government money, or privately, brings with it many responsibilities such as registering as an employer with HM Revenue and Customs, operating a Pay As You Earn scheme, arranging a workplace pension and paying at least the minimum wage.
Tax employment status – e.g. is your carer or personal assistant employed or self-employed?
The most important point to understand is that a person hiring a carer or personal assistant cannot just ‘decide’ that they are self-employed. Doing this can be attractive because it removes many responsibilities from the person hiring someone and can save them some money. However, it is the responsibility of anyone taking someone on to check the status carefully. The Inland Revenue website has more detailed guidance on the general rules surrounding employment status, plus a few tips on how to use HMRC’s new employment status tool (which isn’t specifically designed for people taking on a carer).
The Low Incomes Tax Reform Group’s website covers what the rules are if you take on an agency worker, a family member or a carer who works through their own limited company and the information is aimed specifically at those employing carers or personal assistants.
Setting up as an employer – if the carer or personal assistant is an ‘employee’, the next step is probably to register as an employer with HMRC so that a Pay As You Earn scheme (PAYE) can be set up. The PAYE regime requires tax and National Insurance to be deducted from most payments made by employers to employees.
An employer must register with HMRC (and thus operate a PAYE scheme) if any of the following are true:
- They are paying them at or above the National Insurance Lower Earnings Limit (£128 per week in 2020/21)
- The employee already has another job
- The employee is receiving a state, company or occupational pension
- The employee is receiving employee benefits
This is an easier process than it sounds and the Low Incomes Tax Reform Group provide step-by-step guidance on the website.
Their website also looks at what running a payroll involves – basically it is the process by which the carer’s or personal assistant’s wages are paid and appropriate deductions (like PAYE tax) made. In recognition that not all individual employers will want to run their own payroll, there is also guidance on finding a payroll provider to help with payroll tasks.
Paying wages– ‘Real time information’ (RTI) is the system used for sending payroll information to HMRC – usually every payday.
There are two ways the information can be sent - online, or, if certain requirements are met, by paper. More detail on when paper filing can be used is available on the Disability Tax Guide website. Broadly, it is available for those who, for whatever reason, may be unable to use a computer or have no internet capability.
For online filing, a payroll program will be required and there are several options on the market including some free ones. The Low Incomes Tax Reform Group explain all the options on the Disability Tax Guide website. For employers choosing to use HMRC’s free Basic Payroll Tools (BPT) payroll program, the Low Incomes Tax Reform Group has a unique tool on the site that enables website users to create a payslip. This has proven to be one of the most used features of the website.
Employers must also complete certain forms after the end of the tax year for example, P60s or P11Ds (benefits and expenses form) – more information is available in the dedicated ‘End of Year process’ section of the site.
Pensions auto enrolment (workplace pensions - Every employer with at least one member of staff now has a responsibility of putting those who meet certain criteria into a workplace pension scheme and contributing towards it. This includes those who take on a carer or personal assistant. Direct payment users should speak to their Local Authority (or NHS/DWP as appropriate) regarding their budget to pay for these extra costs.
The process is called automatic enrolment. This is because it is automatic for staff – they don't have to do anything to be enrolled into the pension scheme. But it is not automatic for an employer and there are several things that the employer has to do.
The Low Incomes Tax Reform Group summarise the main aspects of auto enrolment on their website (including how the auto enrolment rules apply to those with part-time or casual staff) and link to more detailed guidance on The Pensions Regulator website, which includes their planning tool to help employers work out what to do and when. Of note is the special support is given by The Pensions Regulator to those employing staff in their home, such as a carer or personal assistant.
National Minimum Wage/National Living Wage - Employers must pay staff the correct minimum wage. The Low Incomes Tax Reform Group website gives an overview of the main rules - and then looks more closely at aspects that may be of particular relevance to employers of carers and personal assistants, for example, the rules on ‘live-in’ staff and travel time and deductions, which can be difficult for workers and employers alike, to understand.
Other – The website also contains a comprehensive section on dealing with HMRC if you have additional needs or need extra support and signposts users to organisations that can provide help with topics outside of the immediate area of expertise (e.g. employment law).
There are clear and easy to understand factsheets to download on many key subjects (such as Employment Status, Registering as an Employer and Auto Enrolment) and other useful resources such as an introductory flipbook ‘Taking on a personal assistant – a basic guide’, payroll checklists, a payroll calendar and a datacard.
A regular news feature means the most up to date payroll and disability related tax matters are highlighted. Recent news items (to give you a flavour of what you might find) include:
- Any questions? Direct Payments
- Making your final payroll submission of the tax year
- PAYE online services planned downtime
- Are you aware that auto enrolment contributions are about to go up?
- Quarterly PAYE and Class 1A NIC payment reminder
- Courts rule self-employed carer is employee
Through a ‘contact us’ facility the Low Income Tax Reform Group also provide free, additional support to website users who have specific tax and National Insurance queries relating to taking on a carer or personal assistant. They can help people understand their obligations and signpost to further help and support if needed.
For an overview of what else you can find on the Disability Tax Guide website, watch a short video entitled Introduction to Disability Tax Guide
If you have any comments about the Disability Tax Guide, and have any suggestions about additional material that could be featured, please get in touch by emailing firstname.lastname@example.org