Casual labour

[itsmefolks]

Scenario….I have a shop and someone comes in 2/3 days a week and I pay them cash in hand. They are retired and have a pension. How much can I pay them before they or I require to pay tax on it?? Many thanks in advance.

[vodkancoke]

I am in the same position. I have a member of staff who is 62, she has a pension and she gets paid £70 for 10 hours work(5 hrs per day), I have to deduct £14 tax from her (20%) and I put it through the PAYE. I doubt that helps you, but I was told if they have a pension and a wage, the tax has to come off somewhere and it's usually off the wage

[Buenchico]

If your employee is under 65 their first £7475 per annum of income (from their state pension, private pension, investments, share dividends, employment and all other taxable sources) is free of tax.

If your employee is between 65 and 74 the first £9940 of their income is free of tax. If they're 75 or over that figure rises to £10,090.

So if, for example, your employee has already used up their tax-free allowance (because their pensions and other income already meet or exceed the relevant figure above), they must pay tax at 20% on every single penny that they earn from you. But if their other income doesn't take them above their personal allowance they only have to pay tax on that part of their income which takes them over that allowance.

Either way, HMRC will regard it as YOUR duty (under the PAYE rules) to ensure that the correct tax is deducted. (They won't look kindly upon a 'cash in hand' arrangement).

Further, if your employee has not reached the state pension age (but has, for example, retired on a private pension) and they earn more than £139 per week you must deduct 12% of their pay which is over £139, as National Insurance. You must also pay the employer's contribution from your own pocket. If the employee has reached the state pension age you must still continue deducting (and paying) National Insurance unless your employee has completed the relevant paperwork which exempts them (and you) from paying it.

Start here for information about PAYE:
http://www.hmrc.gov.uk/paye/index.htm

Chris

[itsmefolks]

Thanks for that. Yea thought as much, unpaid tax collectors yet again!

[Ann]

Thats good news Chris - I hadn't realised the personal allowance changed at 65 (one year to go) I am retired but have state pension + a small works pension so pay a bit of tax now, but in a year won't have to pay - whooppee (one happy OAP!) We really appreciate all your knowledge and info on this site Chris!

[itsmefolks]

Thanks Chris. Yes my help has retired on a private pension. I guess I may have to cut his hours. At the moment he is on 20% commission and with increasing sales its going to be a problem soon.
Thanks again.