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News,May 2018

what is cash flow

What is Cash flow – A Basic Guide!

27/10/2021Business , Business Growth Ideas , Finance

It is important for every company to maintain a good cash flow(CF). If you do not have a good cash flow, it would be difficult to purchase materials, pay salaries, and settle bills. So, when running your company, it is the most crucial thing to look into. Therefore, this blog will let you know: what is cash flow? How to work it out? What can you do to increase your cash flow? So, let’s start!   Need an accountant to manage your financial affairs, look no further other than CruseBuke! We provide tailored accounting and tax services for you at a reasonable price. Contact now!   What is Cash Flow? The balance between your company’s incoming and outgoings over a specific time is called cash flow. It includes any current money and the money coming in and going out. But, it does not include investments or assets.   How to Workout Cashflow? In order to workout cashflow the formula is as follows: Cashflow= (Cash + income) – expenses For instance, suppose if you want to calculate your CF for September. In sales, you make £5,000 and spend £3,000 on new stock and other expenditures for that month. In your business bank account, you had £3,500 at the start of the month. This implies that your companys’ cash flow for September will be £5,500. Putting these values into the formula to make it understandable: Cashflow = (Cash + income) – expenses Cashflow = (£3,500 + £5,000) – £3,000 Cashflow = £8,500 – £3,000 Cashflow = £5,500    Unable to calculate your Cashflow? Let us handle it!   Why is Cashflow Important? The CF shows the financial status of a company, so we can say that it is like its pulse. Your company will have a positive CF if it has more incoming money than money going out. And, the CF will be negative in case the outgoing money is greater in amount than the money coming in. A positive CF implies that your company will have money to invest or restock in essential outlays in the coming days. On the other hand, if your company has a negative CF, it implies that your company will quickly run out of cash and not be able to pay for the required things.   Save your time, money, and energy by letting your financial affairs to CruseBurke. Feel free to reach out today!   How can I Increase my Company’s Cashflow? You can increase it by increasing your company’s sales, minimising its expenses, or doing both. However, in case you want your company to continue improving, you won’t want to minimise your expenses. In addition, without increasing your market investment, you are unlikely to maximise your sales. It is better to look around for short-term financing in this circumstance—many financing options like merchant cash advances, small business loans, business credits, and invoice financing. Every type works differently and has its pros and cons.   Quick Sum Up Now that you know what is cash flow and why it is important for your company. We would sum up our blog by saying that it is essential to manage your company’s CF as it directly impacts its growth. Moreover, a positive CF helps to enhance confidence in the company and puts you in a strong place to deal with lenders and get more discounts from suppliers. Therefore, if you can not manage your CF efficiently, then ask an expert to do this for you!   CruseBurke offers affordable financial services! Get an instant quote today!   Disclaimer: This article intends to provide general information based on what is cash flow.  

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Enterprise Management Incentive

Enterprise Management Incentive (EMI) – A Basic Guide!

25/10/2021Business , Finance , Taxation

The Enterprise Management Incentive (EMI) scheme offers tax advantages for many SMEs. It’s a share option scheme that allows employees to acquire shares after meeting some conditions. This scheme attracts employees by providing them the opportunity to equally participate in the business. Continue reading this blog to know more about EMI…!   We have a team of EMI experts who can help you with this scheme, including valuation HMRC filing, vesting schedules, and long-term administration for your company’s growth. We guarantee that working with us will save you time and money!   What is an Enterprise Management Incentive (EMI) Scheme? The EMI scheme provides a share option, which gives you the right to get shares based on the terms of the agreement. This specifies how many shares a person can acquire, how much each share costs, and when you can get the shares through the exercise of the option. Option exercise can take place after a particular time of employment. It can also occur when achieving performance targets or when the company is sold.   Why Have EMI Schemes? If you’re a small business with a limited budget, you might attract staff by offering a share or share option package. Suppose an employee came to know that selling the respective company’s share can result in getting a profitable lump sum. In that case, he or she will join your company even if the compensation package is not above that of competing companies. As a result of shares grants, employee ownership causes them to be concerned about the company’s interest, just as the employer is. In this way, the entire staff works together to increase the shareholder’s value. They’re all working to grow the company and for increasing the value of the stock and dividends.   Qualifying Companies: Your company should meet the following conditions to qualify for the EMI scheme: Gross assets of £30 million or less. Is not amongst the industries excluded by HMRC: banking, farming, shipbuilding, property development, and provision of legal services. Containing 249 employees (fewer than 250). It is not majority-owned or run by another company. Eligibility for Employees: To be eligible, an employee should fulfill the below conditions: Should not hold more than 30% of the company’s shares. Should not have share options worth above £250,000 (at the time of grant). Must spend 25 hours weekly, and 75% of his/her working time as a company’s employee.   Want to register for EMI, contact us right away!   When your Company can Lose the Tax-Advantaged Status? Your company can lose it if: It hasn’t registered for Enterprise Management Incentive within the terms of the legislation. The company is unable to inform HMRC about the grant of the EMI option within 92 days. The company’s option holders are unable to exercise their option within 90 days because of a disqualifying incident.   The Working of an Enterprise Management Incentive Scheme: First of all, the company should establish if it is enterprise management incentive qualifying or not with the help of its experienced advisors. In case the company is, then it needs to decide the working of an EMI scheme plan. EMI is too flexible, but there are some important issues to consider: Which employees should be given share options, and how many should they be granted? What kind of shares should have options? In order to exercise options and to get shares, how much will employees need to pay? What happens in case a company’s option holder leaves? The formal EMI option agreements containing all relevant terms should be prepared once all the issues mentioned above are resolved. The options are formally granted when both the employer and the employee have signed. Within 92 days, the option grant has to be notified to HMRC.   Quick Sum Up We would summarise our blog by saying that enterprise management incentive (EMI) options are worth considering for both companies and employees. Companies would face recruitment problems if they do not provide offer options. Therefore, if your company has not implemented an option plan yet, now is the time to do so.   We at CruseBurke provide a full-fledged Package on EMI, including legal/ Tax and valuation requirements with expert advice and in-depth discussions! Contact us now!   Disclaimer: This blog post covers the basic information about EMI.  

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cost of sales

What is Cost of Sales and How to Calculate it?

25/10/2021Business , Finance

You are required to understand the flow of money through your company in order to calculate the profits and debts accurately.  In addition, if you don’t have knowledge of how to move your money then it will be hard to manage the cash flow. And, cost of sales is one of the most important matrices to track for this task (particularly at the time of selling products). Therefore, this blog will let you know about what is cost of sales and how to work out it.  So, let’s start!   Get inclusive accounting, bookkeeping, tax, and company formation services with our qualified accountants at an affordable rate. Get in touch today!   What is Cost of Sales? The amount of money that a company uses in order to make a sale is known as the cost of sales. It is also known as COGS (Cost of Goods Sold). These sales are not similar to expenses. This is because the expenses are not directly linked to the individual sales as COGS do.   Get in touch with our skilled accountants to work out your cost of sales!   What to Include When Calculating COGS? The COGS may include how much amount of money to pay for the following: Raw materials to make products Subcontractors providing the core service Stock Materials for a builder You should include these expenses even if you do not pay for them at the time of making a sale. It is also essential to know that a lot of company expenditures are allowable. Therefore, you can claim them and can reduce your tax liability.   The formula of Cost of Goods Sold The formula of COGS is as follows:   By the following example, you will understand the formula better. A company has £14,000 initial inventory. During the month,  it has total purchases of £18,000, and at the end of the month, it has £5,000 ending inventory. Now, let’s calculate the COGS with the given figures:   Cost of Goods Sold = Initial Inventory + Purchases – Ending Inventory Cost of Goods Sold = £14,000  +  £18,000 –  £5,000 Cost of Goods Sold = £27,000   Unable to calculate the cost of sales? Feel free to contact us! We will calculate your COS in no time and at a reasonable price!   What is the Importance of Cost of Sales? Knowing how much it costs on making a sale will assist you to figure out how efficiently your company operates, or where it needs more focus. It is also a vital part of working out a gross profit. Gross Profit = Sales – COGS    Unable to calculate your company’s gross profit? Let us handle this!   Final Thoughts Now that you know what is cost of sales. We would sum up our discussion by saying that you must consider your initial inventory, purchases, and ending inventory when calculating your COGS. Use the formula we have provided in this article to work out the COGS. This formula will assist you to forecast your cash flow, figuring out your profit margins and maintaining the profitability of your company.   Feel free to contact our professionals if you are worried about calculating COGS! We will work out in no time and at a reasonable price!   Disclaimer: This blog contains general information about what is cost of sales.

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business asset disposal relief

Business Asset Disposal Relief – Guide for Beginners!

22/10/2021Business , Finance

The Entrepreneurs’ Relief has been renamed Business Asset Disposal Relief (BADR) since March 2020. It minimises the capital gains tax rate to 10 percent on shares. This makes the United Kingdom tax heaven for business persons. So, if your looking for a significant source to know about BADR, you just have found the right source. We will let you know about: What is BADR, and who is eligible for it? What are the rules of BADR? How much and How to claim BADR? So, let’s start!   Our tax professionals can assess your situation and let you know where you stand. We suggest improvements (if needed) that will get you closer to meeting the Business Assets Disposal Relief requirements. Contact us now!   What is Business Asset Disposal Relief (BADR)? When the business owners dispose of relevant assets of their business, a BADR is a valuable CGT relief that is available to them. It is an important area of tax planning, and it can minimise the tax rate on the first £1 million of eligible capital gains to 10 percent. Many business owners should confirm their eligibility for it as a part of their exit planning.   What are the BADR Rules? The rules for business asset disposal relief are as follows: There should be some proof of working in the company (no minimum hours or salary requirements). Non-executive directors & secretaries of the company will be counted as officers. A document employment contract provides evidence of employment and will help you if HM Revenue & Customs challenges your claim.   Who is Eligible for Business Asset Disposal Relief? It is usually available to: Company directors and employees at the time of disposal of shares in their personal trading enterprise. Trustees when making disposal of their company assets, in certain cases. Company employees and directors who sell qualified shareholdings that are earned under an EMI (enterprise management incentive) share option scheme. Sole traders or partners at the time of selling the entire or part of their trading enterprises.   How Much BADR Can you Claim? Business Asset Disposal Relief is available for qualifying gains up to the lifetime threshold that is applied when making disposal. For qualified disposals made on or after (March 11, 2020), the lifetime threshold was minimised to £1 million. If you surpass the lifetime limit, then excess gains will be taxed at the usual rate of capital gains tax (CGT).   Turn to CruseBurke for managing and recording finances and for claiming BADR! We have a team of skilled accountants who will handle everything with HMRC on your behalf. Contact us right away!   How do you Claim BADR? You must claim the BADR to HM Revenue & Customs for the year in which gain arises. It must be claimed by the first anniversary of (January 31) following the tax year of disposal. If you fail to do so, then you will not be eligible for business asset disposal relief. For BADR, you can claim via a Self-Assessment tax return. You can also claim by making a standalone claim, and usually, most claims are made on personal tax returns.   Conclusion We will conclude our blog by saying that a business asset disposal relief is not automatic; you have to claim it at the right time mentioned above. Otherwise, you will not qualify for this relief. Therefore, to be on the safe side, it is better to hire a professional for claiming BADR tax relief on your behalf.   Looking for a professional to claim BADR? Then, feel free to contact us! We are a team of professionals that will handle everything with HMRC on your behalf and help you claim what is rightfully yours! So, contact us right away!  

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What is Child Benefit

What is Child Benefit and How to Claim It?

15/10/2021Finance , Tax Issues

If you want to raise your family budget and you’ve just had a baby, you can claim child benefit anytime, but it is better to do so before the infant is three months old. You still need to apply, even if you believe that you won’t get anything. In this way, you won’t fail to take advantage of this benefit. Let’s explore what is child benefit and how you can claim it?   What is Child Benefit? If you’re parents or bringing up a child as a guardian, there’s a certain amount of money you’ll get as a child benefit. These rules apply to England, Wales, Scotland and Northern Ireland.  Essentially, this benefit is non-taxable, but if you or your partner earn over £50,000 (higher rate taxpayer), you need to pay tax on it.    Don’t have time to claim Child benefit? Turn to us! Rely on CruseBurke to take care of all your tax and financial issues. Contact us right away!   Can You Get Child Benefit? You are entitled to receive this benefit if you are responsible for bringing up a child who is: aged below 16 under 20- if they’re in approved full-time training or education You won’t get this benefit if your child: starts a paid job for up to 24 hours or more in a week is not in approved full-time education or training. starts apprenticeship gets certain benefits in his/her own right   How Much Can You Claim as Child Benefit? Currently, in 2021/22, there are two child benefits rates that you can get. You can claim: £21.15 a week for your first or eldest child £14 a week for additional children It means that you get over £1,000 a year if you have one child, and an additional amount of £800 for second and more children.   Manage your individual and business finances with CruseBurke. Just let us know your need for affordable financial services tailored to your business needs!    How to Claim Child Benefit? To claim a child benefit, you need to send the form (CH2) to Child Benefit Office. You can get the online form here on the government website. If your child is born outside the UK or Northern Ireland, you need to provide the original birth certificate of the child that will be returned. Other than that, you don’t need to send your child’s birth certificate. For adopted children, send the original adoption certificate.   How You Get Paid a Child Benefit? You’ll be paid this benefit directly to your Bank or Building Society account. You get the payments every four weeks, but it can be paid weekly for people who’re single parents or get: income support income-based Jobseeker’s Allowance income-based Employment and Support Allowance universal or Pension Credit   What Happens Next? When your children turn 16 until the 31st August or are 20 if they stay in education or training, you’d not receive the child benefits. When your child turned 16, HMRC will ask via a letter whether your child will stay in training or education or not. You need to respond to this letter to keep receiving the child benefit. You also need to inform HMRC if your family circumstances change, for instance, you are separated from your partner or your child moves out. If you or your partners earn above £50,000 a year, you might need to pay more tax. It only starts in April after you claim. In case, you disagree with HMRC’s decision or your claim is rejected, you can ask for ‘mandatory reconsideration   Quick Sum Up We hope now you have got a good understanding of what is child benefits and how to claim it. You need to apply for it to get over £1,000 a year if you have one child and £800 if you bring up more than one child. To claim it, just need to send the CH2 form to Child Benefit Office with the required documents. Then, you’d be entitled to get this benefit directly to your account after every four weeks or on a weekly basis. Higher rate taxpayer’s earnings above £50,000 a year might need to more pay tax.   Want to boost your savings? Optimise your finances with CruseBurke. We provide cost-effective accounting, taxation, and payroll services at affordable prices. Contact us today!   Get an instant quote now!   Disclaimer: This blog is intended to provide general information on Child Benefits.

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How does Crowdfunding work? It is a way to quickly raise large sums of capital from various lenders, customers, or investors, Learn more

What is Crowdfunding and How Does It Work?

14/10/2021Budgets & Other , Business , Finance

The crowdfunding platforms provide small businesses a way to quickly raise large sums of capital from various minority lenders, customers, or investors in a short period of time. This type of fundraising is becoming more popular, and it is being utilised to fund not only businesses but also creative projects, social movements, etc. Therefore, in this blog, you will know how does crowdfunding work and its further details. Manage your business finances with CruseBurke. Just let us know your need for affordable financial services tailored to your business needs! What is Crowdfunding & What are its types? It is a way to raise capital. You ask for money from a lot of people at once, often through the internet. You will have to decide on a target amount and pitch your next project or business information to your potential crowd of investors. Then raise the entire amount of money to proceed. Types of Crowdfunding The following are different types of it. 1) Loan-Based Crowdfunding In this, the amount of money is lent to your company at an interest rate, which is fixed. 2) Investment-Based Crowdfunding In this type of crowdfunding, people invest in your company for a share in return. 3) Donation-Based Crowdfunding In this, people contribute to your charity in exchange for something promised in return. 4) Reward-Based Crowdfunding In exchange for a person’s investment, you give a reward generally related to the project you are promoting. How Does Crowdfunding Work? In order to register your project, you will generally utilise a crowdfunding website online to register your project and start raising the money. Some of the popular websites are stated below.   After choosing the site, you will have to register your project. Keep in mind that along with registering, you are informing your audience about yourself, like what you want to achieve and why does the audience investment is too valuable. Hit Your Target When your campaign is up and running, then it’s time to advertise it on your email list, social media, and anywhere else where you have an interested audience. Tell them details about how their donation is going to assist you in improving your business for them. Keep your audience updated about the ongoing process of fundraising and maintain enthusiasm. Key takeaway: Most of the platforms or websites take an approach (all-or-nothing), which means no money will be paid to you if you do not hit your target. Therefore it is important to go all out on your other websites 0r platforms in order to raise awareness. Where is the Money? As long as the campaign is within the time period set from the beginning, your investors can not pledge money at any stage of your campaign. But once it is not within the timeframe, the investors can commit the funds at any point. Once you reach your target and the campaign ends, your crowdfunding website or platform will deduct a percentage from the total amount of money raised. When planning your crowdfunding campaigns, you may also have to consider tax obligations. For instance, investment and reward-based crowdfunding is generally categorised as revenue and can be liable to revenue and sales tax. CruseBurke has a team of accountants to provide affordable financial services for you. Feel free to reach out! Do I Need to Payback Crowdfunding? It is based on the type of crowdfunding you are going for. For example, with reward and donation-based crowdfunding, people invest for various reasons, usually through social or personal motivation. But, it is not for heavy financial gain. In loan-based crowdfunding, the investors, often with interest, receive their amount back. And, in investment-based crowdfunding, people generally invest money for your company share. Therefore, they will see the rise and fall of the value of their shares. But, you will not have to pay them back. Conclusion Now that you know how does crowdfunding works, you must also know the harsh facts of crowdfunding. You have established high public expectations, so missing promised deadlines or failing to meet their expectations will irritate people. In addition to that, you can have bad publicity. The smart strategy is to stay engaged with your audience and share your journey with them. If your audience is aware of your challenges, they will forgive a lot of things. It is always advisable to get help from a financial advisor to flourish your business. So what’re you waiting for. Contact our financial advisor to skyrocket your business growth! Disclaimer: This article intends to provide general information on how does crowdfunding work.

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how overdrafts work

How Overdraft Works: Types, Limits, Costs & Advantages

11/10/2021Business , Finance

In case you need to pay unexpected expenses, an overdraft may be a thoughtful way of borrowing money from your bank in the short term. However, before using an overdraft, you should be aware of everything associated with it. Understanding the advantages and disadvantages of an overdraft can assist you in minimising, and even avoiding paying interest. Therefore, this blog will let you know what an overdraft is, how overdraft works, and its advantages and drawbacks. So, let’s start! We provide cost-effective accounting, taxation, and payroll services at affordable prices. Contact us today! What is an Overdraft? It is a short-term financial loan that permits you to receive a credit facility (temporary) when your account balance goes below zero. You usually get an overdraft on your current account that is based on your credit history. If your bank provides you with an overdraft, it provides the facility to spend more cash than you have (in a bank account). In addition, it is a debt that you need to pay back to the bank along with the interest or fees. Some banks automatically provide you with an overdraft facility, whereas many of them require a proper application for it. For instance, if you have no remaining money in your account and you spend £40. In this case, your balance would be – £40. This implies that you are utilising an overdraft. How Overdraft Works? The following are the two types of overdraft. 1) Arranged Overdraft These overdrafts are arranged in advance. In this type of overdraft, you agree on a limit at the time of account opening with your bank. Then, you can only spend money up to that agreed-upon limit. 2) Unarranged Overdraft These overdrafts are not pre-agreed. This can be because you spend more money than you have without agreeing upon any overdraft limit with the bank. This also happens when you have crossed the limit of your arranged overdraft. So, suppose you’re already aware of the fact that you’re going to land on an unarranged overdraft. In that case, you may contact your bank beforehand to arrange or extend a temporary arranged overdraft. Furthermore, unarranged overdrafts can result in declined transactions or higher charges. It’s always better to arrange an overdraft in advance if you think you’ll need one. The Advantages and Drawbacks of Overdrafts Go through the advantages and disadvantages of overdrafts before using one.     What is the Limit of an Overdraft? Your overdraft limit depends on multiple factors. It does not merely depend on the type of bank account you use. High-scale banks, for instance, do not provide this service. Furthermore, small and medium-sized banks also don’t provide this service to persons new to credit, have filed for bankruptcy, or have an IVA. If your bank provides you with an overdraft facility, you may not always be able to utilise it because it solely depends on the bank’s discretion and is subject to status. Your bank will evaluate your creditworthiness, time, age, incomes, and credit ratings, among other things, when you apply for an overdraft. After the inspection, your bank will allow you to use this facility as needed. What will be the Cost of Overdraft? The overdrafts fees and charges vary from bank to bank. If you have a current account and use an overdraft frequently, you should evaluate the fees and charges of the other bank before switching. You can calculate other banks’ charges by using the current charges of your overdraft. Many factors must be considered before making a final decision, as a low-cost option may turn out to be an expensive mistake in the long term. Furthermore, some banks offer this facility without any interest charges and with minimal service fees. Conclusion Now that you know how overdraft works. We will conclude our blog by saying that your bank will allow you to utilise the overdraft limit of your current account, but you need to keep an eye on all possibilities to avoid paying higher interest rates and costs. To be on the safe side, we recommend comparing the fees and interest rates of various banks. Additionally, if you use an overdraft frequently, you should consider other options such as personal loans, which are more effective, cost-effective, and have a longer repayment duration. Looking for expert financial advice! Look no further other than CruseBurke. We have a team of Certified Chartered Accountants in Corydon to handle your finances in the best way possible. Contact now! Disclaimer: This blog provides general information on how overdraft works.

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What Is HMO? A Basic Guide for Beginners

04/10/2021Finance , Landlord , Property

The landlords can have more occupants and earn more rental revenue by letting an HMO (House in Multiple Occupations). However, there are many rules and responsibilities like minimising size requirements, overcrowding, and licensing to HMO landlords. To know more about HMOs’ responsibilities, read this blog till the end.   Talk to one of our chartered accountants in Croydon about the online accountancy services we provide. We are just a click away! If you want our service of managing HMO and its tenants, then feel free to contact us!    What is HMO (House in Multiple Occupations)? It is a property that has three or more people who do not form a single household and typically share one or more bathroom, toilet, or kitchen facilities. According to the government, the households include singles, married or civil partners (couples), and carers & foster parents. For instance, three people who do not relate to each other in three rooms will make up three households, whereas a property with two couples (married or civil partners) will form two households. HMO can normally take the following forms: A guardian occupied property Shared houses Guesthouses Hostels Residential care homes Certain bed and breakfast establishments Bedsit accommodation Houses let to lodgers   The Responsibilities for Letting an HMO As a landlord, you are required to fulfill your legal liabilities even if you let an HMO. These legal responsibilities include meeting energy efficiency rules and protecting deposits. However, the following are some additional responsibilities of the landlords of HMOs such as: Carrying out a gas safety check annually Ensuring the property is not overcrowded Maintaining as well as repairing facilities and communal areas Providing washing and cooking facilities and enough waste bins for many tenants in the property At least once every five years, checking the electrical installations Ensuring the fire risk assessment is conducted properly Installing heat detectors in kitchens and smoke alarms; hence, proper fire safety equipment should be installed.   Our accountants at CruseBurke are qualified and cost-effective! We save your time, money, and stress by handling all your finances and business problems in no time! So, allow us to do this at an affordable package!    Do You Require a License for an HMO? Every license will identify the total number of individuals for the occupation of the property. Moreover, it will also identify the number of years it will be valid. For an HMO, you need a license when in the property there are: Two or more separate households living Five or more tenants living  Through your local council, you should apply for a license. The terms of the license will be set by the individual councils. You can ask your letting agent to apply for a license, or you can apply yourself. When applying for a license, a landlord has to inform the following different parties, and the details of these parties must be pass on to the council. The occupants who have more than three years left on the current tenancy The lender in case you have a buy-to-let mortgage The freeholder of the property (if any) Any other owners of the property   Conclusion We hope now you have understood what is HMO and what are the responsibilities of an HMO landlord. Finally, we will conclude our blog by saying that managing all your properties by yourself is complex. So, if you want to grow your property portfolio, we recommend you take help from a professional letting agent to manage your house of multiple occupants (HMO).   Are you looking for a professional letting agent? Then, look no other than CruseBurke. We are qualified, cost-effective accountants that will properly manage your HMO and its tenants at an affordable package! So, contact us right away!    Disclaimer: This blog contains general information on what is HMO.

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Cash in hand work

Is Cash in Hand Work Illegal in the UK?

30/09/2021Business , Finance , Personal Tax

Accepting cash in hand work? If yes, then you should know how you’ll be taxed on it. The taxes will be based on your circumstances, for instance, whether you are a registered self-employed person or have a job. This blog will explain how HMRC reviews cash-in-hand work and what you must do in the most common situations. Are you having trouble registering as a self-employed person? We’ll get your self-employed business up and running at low cost and less time. So fill out this form right now to save time & money! What Exactly Is a Cash In Hand Work Payment? It refers to the payments, where an employer pays an employee or a contractor directly in cash, rather than through e-transfers or bank deposits. While the act of paying is not illegal, it can become problematic if it is used to avoid taxes and National Insurance Contributions (NICs), which adds up to tax evasion and is illegal. This method is used in industries like hospitality, construction, home care and domestic services as it can be used to pay daily or weekly wages to workers. But they must comply with HMRC’s PAYE regulations. Is Cash In Hand Work Illegal? The act of being paid in cash itself is not illegal in the UK. However, it becomes illegal when the income is not declared to HMRC to avoid paying taxes and National Insurance contributions. For cash in hand work to be legal, both employees and employers must meet their tax obligations. For employees: If the employer doesn’t use PAYE, the employee must register as self-employed with HMRC if they are self-employed. They must report cash earnings via Self Assessment. For employers: Businesses that pay cash must record the payments, provide payslips detailing deductions for tax and National Insurance, and pay those deductions to HMRC. Additionally, all employers must submit RTI reports to HMRC every time employees are paid. HMRC Side Hustle Crackdown In recent years, HMRC has been cracking down on individuals receiving cash in hand work payments as part of their side hustles. This HMRC side hustle crackdown is focused on ensuring that all income is properly declared to avoid tax evasion. If you are earning money through a side hustle, even if it’s cash in hand work, it must be reported to HMRC. Failing to declare this income can lead to significant penalties and fines. Benefits Of Cash In Hand Work Payments Cash in hand work payments include several benefits, some of which are described below: For Individuals Cash in hand work transactions carry a lower risk of data breaches and help identify fraud compared to digital payments, as there is no risk of check bounce. They do not leave a digital trail, thus helping in more privacy and security compared to electronic payments. Note: Privacy does not exempt workers or businesses from keeping proper records or declaring income to HMRC. They are straightforward, eliminating the need for complex electronic systems and avoiding the frustration of system crashes and internet or server connectivity issues. For Businesses Businesses have an advantage in this way, that can avoid high transaction costs charged by card issuers and banks, especially for smaller transactions by accepting cash payments. Cash can help provide a backup for electronic payment systems, as it works even during blackouts or power outages or when the digital networks are down. This can also help in immediate cash flows, where businesses can receive instant access to funds through cash transactions, and can be used for immediate operational needs. Disclaimer: These benefits relate to the medium of exchange (physical currency) and not the legality of payment for work. All income earned must still be declared to HMRC in the UK, regardless of whether it is paid by bank transfer or in cash, to comply with tax laws. Drawbacks Of Cash In Hand Work Payments Cash in hand work payments have various drawbacks or limitations, which can arise due to various reasons, like: Legal Risks If proper documentation is not done, cash in hand work payments could lead to tax compliance issues and various legal consequences. Lack of Tracking Physical cash payments do not automatically create digital records like card transactions, making them difficult to track. Moreover, it might lead to human error, making it harder to prove income to HMRC. Tax Compliance and Legal Issues It is illegal to fail to declare income to the tax authorities, including cash income. This can result in heavy penalties, fines and even imprisonment for individuals. What are Your Responsibilities When You Pay Your Employees Cash in Hand? When you are paying your employee cash in hand work in the UK, you remain responsible for deducting and remitting Income Tax and NICs through the PAYE system to the HMRC. Failure to comply with these responsibilities can result in heavy fines, penalties and legal consequences for non-compliance. The following are your responsibilities as an employer: Report To The HMRC You must ensure to submit accurate and timely returns to the HMRC, reporting your employee’s earnings and the deductions made through PAYE. Providing Payslips Employees are entitled legally to a detailed payslip with every payment, whether it is cash or through bank transfer. Complying With Minimum Wage Laws As an employer, you must ensure that the gross pay for all working hours meets the National Minimum Wage requirements. Meeting Statutory Entitlements You must remain responsible for paying the employees statutory benefits, statutory sick pay or maternity pay. Can An Employer Get Into Trouble For Paying Cash In Hand? Yes, an employer can get into serious trouble for paying cash in hand, if they are doing it to avoid declaring income and paying taxes, this constitutes tax evasion. This can include failing to deduct tax and National Insurance through PAYE, failing to report these payments to the HMRC and paying less than the National Minimum Wage. Penalties can be either heavy fines or prosecution and imprisonment, and employees may lose important employment rights and benefits. There are various …

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