When you employ casual workers, even for a short period, you need to be careful with their pay. Get it wrong and you could end up footing the tax and NI you should have deducted.
HMRC used to be reasonably relaxed with “casual workers” where they were employed for a week or less. However, the only concession now is for short-term harvest workers and beaters for shoots.
When you employ someone, for just a few days or weeks, e.g. student in the holidays, the chances are they won’t have a P45. You should give them the usual “starter checklist” to complete to establish the correct code to operate. When you pay an employee, temporary or otherwise, who hasn’t given you a P45 or starter checklist, don’t make the mistake of using the emergency code to work out their tax. You must use code BR, or insufficient tax will be collected and HMRC is likely to ask you to pay the shortfall.
Also watch out for agreeing “cash-in-hand” pay. This can be costly. If someone is taken on and it agreed to pay them £65 in their hand, per day (watch out for minimum wage requirements – this is in excess of the NMW). If the person is paid for 10 days but then leaves before completing the starter checklist, the employer account for tax on the employee’s pay using code BR. To arrive at the £65 per day it has paid, this needs to be “grossed up”. The gross pay in 2019/20 is £81.25 per week – so £16.25 * 10 = £162.50 extra has to be paid – total £650 wages and 162.50 tax = £812.50. Had the starter checklist been completed, an emergency code could have been used, and in fact no tax would be payable in 2019/20.
Under RTI-real time information filing, it is essential you apply PAYE for casual and short-term employees in the same way as for permanent staff. This includes notifying HMRC of their starting and leaving details on a full payment submission (FPS).
Ask all new starters – whether casual or not – to fill out a starter checklist as one of their first tasks on day one.
Avoid cash-in-hand pay. Use normal pay arrangements for casual workers (indeed anyone(!) to avoid unexpected tax and NI costs.
At Glover Stanbury, all of our services are designed to add significant value to your business and personal wealth. read more