Tax Do’s And Don’ts Of Employing Casual Workers

Here’s How To Avoid A Hefty Tax Bill When Employing Casual Workers, Direct From The HMRC’s Tax Guide.

When you employ casual workers for a short period of time, you need to take special care when agreeing and processing their pay. A mistake could leave you on the wrong end of a tax and NI bill. Here are some do’s and don’ts of PAYE issues surrounding casual labour, helping you prevent problems in the long run.

Do: Use The Correct Code To Operate

When you employ someone for a matter of days or weeks (for example, a student in the holidays), chances are they won’t have a P45 from a previous job. When you pay an employee, temporary or otherwise, who hasn’t given you a P45 or starter checklist, don’t make the common 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. BR will mean they pay tax on all of their income at 20%.

Don’t: Disregard New Rules And Concessions

HMRC used to take a more relaxed approach to casual workers where they were employed for a week or less. However, the only current concession is for short-term harvest workers and beaters for shoots.

Do: Handle Full-Time And Part-Time Workers The Same

Since the introduction of RTI, the golden rule is that, apart from harvest workers/beaters, you should tackle 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) and issuing them with a new starter checklist at the start of their first day.

Don’t: Use “Cash In Hand” Payments

Use normal pay arrangements for casual workers to avoid unexpected tax and NI costs. Any cash payment is almost guaranteed to get HMRC’s attention.

With the right preparation, avoiding tax issues with casual employees is a breeze!

These are a few of our top tips, but for more information on tax rates and allowances, check out our info hub.