Advice about going from cash in hand work to contracted salary

dirtychinchilla · 2 Dec 2012 at 13:37

Afternoon everyone,

I currently work 40 hours a week for minimum wage and it's paid to me cash in hand. This arrangement worked when I started working here but it's been about six weeks and I've settled into the job and the money aspect of it really isn't good enough for me to continue working there. I am thinking about proposing to my boss that he start paying me about £8.50/h with a three monthly contract (so that I'm not tied in for too long - the job isn't perfect).

What I'd really like to know from employers out there is how me asking for a contract will effect the amount my boss has to pay to keep me ie how much extra tax, NI etc he'll have to pay as I know he's very much aware of all this kind of stuff and his judgement on my salary increase will be partially based on this, so I don't want to push.

Any other advice you guys have about me proposing this to him would be much appreciated. When I first started working there it was made clear that he'd rather not have me on the books, but I either need to earn more to be able to support myself and save for my future, or leave and focus entirely on looking for a new job.

Thanks in advance,
dirtychinchilla

cm1179 · 2 Dec 2012 at 13:39

dirtychinchilla said:
will effect the amount my boss has to pay to keep me ie how much extra tax, NI etc he'll have to pay as I know he's very much aware of all this kind of stuff and his judgement on my salary increase will be partially based on this, so I don't want to push.

well, you know the amount don't you? it's the same one you've been putting aside for your tax return, isn't it?

dirtychinchilla · 2 Dec 2012 at 13:41

Sorry I don't know if I've made it clear, but what I'm asking is whether he'll incur any costs other than my salary?

Swordfish · 2 Dec 2012 at 13:45

dirtychinchilla said:
Sorry I don't know if I've made it clear, but what I'm asking is whether he'll incur any costs other than my salary?

Yes - NI contribution.

When you say cash in hand, do you mean you are paid your wages every week in cash and your employer deducts the Tax & NI before or are you not paying tax/NI at all?

dirtychinchilla · 2 Dec 2012 at 13:48

Swordfish said:
Yes - NI contribution.

When you say cash in hand, do you mean you are paid your wages every week in cash and your employer deducts the Tax & NI before or are you not paying tax/NI at all?

I am paid every week cash in hand. With regards to the tax & NI, quite honestly, I don't know, but personally I've not yet reached the threshold for taxable salary this year.

Swordfish · 2 Dec 2012 at 13:52

dirtychinchilla said:
I am paid every week cash in hand. With regards to the tax & NI, quite honestly, I don't know, but personally I've not yet reached the threshold for taxable salary this year.

That is not how things work. I am not an expert but as you are on 40hrs per week at minimum wage that mean you will be earning £247.60 per week. The amount you start paying tax at is £155.68 per week. So you have to be paying tax and NI. What does it say on your payslip.

cm1179 · 2 Dec 2012 at 13:52

dirtychinchilla said:
I am paid every week cash in hand. With regards to the tax & NI, quite honestly, I don't know, but personally I've not yet reached the threshold for taxable salary this year.

riiiiight.

Surveyor · 2 Dec 2012 at 13:56

dirtychinchilla said:
I am paid every week cash in hand. With regards to the tax & NI, quite honestly, I don't know, but personally I've not yet reached the threshold for taxable salary this year.

Is that your recorded income or are you including all your "cash in hand" work?

Even if you've earned below the Income Tax threshold you should still be paying National Insurance contributions, as should your employer.

Bluntly put you're both involved in tax evasion.

CREATIVE!11 · 2 Dec 2012 at 13:59

Oh well op all rich evade tax worth billions.

Mayaswell since ur on min wage.

Surveyor · 2 Dec 2012 at 14:05

sp1ke said:
Oh well op all rich evade tax worth billions.

Mayaswell since ur on min wage.

I think you're confusing tax avoidance, which may be seen as immoral but is legal, and tax evasion which is illegal.

CREATIVE!11 · 2 Dec 2012 at 14:10

Surveyor said:
I think you're confusing tax avoidance, which may be seen as immoral but is legal, and tax evasion which is illegal.

Both achieve the same result, so who cares.

Just don't get busted OP and ur good to go.

-BA- · 2 Dec 2012 at 14:16

If your employer has stated he doesn't want you on his books then he has clearly stated he is not paying tax and N.I. for you. One minute you are saying you know you haven't earned the threshold for tax and the next you are saying you aren't aware of what your employer is really doing.

You know exactly what is going on...

As for leaving and finding another job; you are working 40 hours a week not 120, you have plenty of time to continue jobsearching without having to jack it in. But yes your priority should be to seek work that is more secure, pays better and above all, legal. It is a myth to think that the employer is doing you a favour by being cash in hand. He isn't and it will catch up with you one day.

dirtychinchilla · 2 Dec 2012 at 14:17

To make things clear, I'll state again, I am well below the threshold of taxable income and am well withing my rights to earn below £7,475 before being taxed. I am not attempting to avoid paying tax, and, as is evident by my OP, am trying to ensure that I do pay taxes. So stop hounding me about that.

Swordfish said:
That is not how things work. I am not an expert but as you are on 40hrs per week at minimum wage that mean you will be earning £247.60 per week. The amount you start paying tax at is £155.68 per week. So you have to be paying tax and NI. What does it say on your payslip.

Are you saying that taxable income is judged on projected earnings for the year and not what you actually receive? Otherwise what you have said doesn't make sense. Surely you have to reach the tax threshold for that year before you can actually be taxed on it.

Surveyor said:
Is that your recorded income or are you including all your "cash in hand" work?

Even if you've earned below the Income Tax threshold you should still be paying National Insurance contributions, as should your employer.

Bluntly put you're both involved in tax evasion.

This is all my recorded income, I have no other source of income, and am not involved in tax evasion or avoidance, and as I stated at the beginning of this post, I am trying to ensure that everything is above board, so I'd appreciate you not biting my head off when I'm actually trying to seek advice.

dirtychinchilla · 2 Dec 2012 at 14:19

-BA- said:
As for leaving and finding another job; you are working 40 hours a week not 120, you have plenty of time to continue jobsearching without having to jack it in. But yes your priority should be to seek work that is more secure, pays better and above all, legal. It is a myth to think that the employer is doing you a favour by being cash in hand. He isn't and it will catch up with you one day.

Yup this is true, but I can't really go to him saying I want a pay rise etc and not have any leverage. I know that he really wants me to keep working for him and would be absolutely gutted to lose me. I also know that I could find another job, but I am happy in this one so there's no reason for me to leave if this situation can be resolved/improved.

Surveyor · 2 Dec 2012 at 14:22

sp1ke said:
Both achieve the same result, so who cares.

Just don't get busted OP and ur good to go.

HMRC care and the OP should care.

With tax avoidance HMRC will try to close any loopholes they legally can and the "tax avoider" can suffer some bad publicity, Jimmy Carr for example.

With tax evasion then HMRC can come down on you like a ton of bricks and you can even be prosecuted for it (though this is usually reserved for the worst cases).

Also get caught evading tax and no doubt HMRC will take a keen interest in your financial dealings for a long time.

-BA- · 2 Dec 2012 at 14:22

Get another job lined up, then you have leverage; until then bide your time and just drop hints. Christmas is coming up so I wouldn't be too hasty.

sigma · 2 Dec 2012 at 14:25

sp1ke said:
Both achieve the same result, so who cares.

Just don't get busted OP and ur good to go.

wut

PhillyDee · 2 Dec 2012 at 14:26

dirtychinchilla said:
To make things clear, I'll state again, I am well below the threshold of taxable income and am well withing my rights to earn below £7,475 before being taxed. I am not attempting to avoid paying tax, and, as is evident by my OP, am trying to ensure that I do pay taxes. So stop hounding me about that.

Are you saying that taxable income is judged on projected earnings for the year and not what you actually receive? Otherwise what you have said doesn't make sense. Surely you have to reach the tax threshold for that year before you can actually be taxed on it.

Thats not how PAYE actually works.

Otherwise no one would pay any tax at all until a few months later.
Theres a quick here: http://www.pistonheads.com/gassing/topic.asp?t=759129

NI is different, and I believe payable straight away over £139 per week. No 'free amounts'. IIRC anyway. I have a fair good understanding, but do not yet do any PAYE accounts as I do not have any employees.

And as for "Clear he would rather not have me on the books", means you clearly are not, he should be paying employer NI and tax right away. That part is non negotiable. Unless there is something you are not telling us, this is indeed Tax Evasion, not just you, but him also.

sigma · 2 Dec 2012 at 14:27

dirtychinchilla said:
To make things clear, I'll state again, I am well below the threshold of taxable income and am well withing my rights to earn below £7,475 before being taxed.

Pretty sure you should a) be paying NI either way and b) be paying tax and then getting a rebate if you are below the threshold. You need to speak to your employer.

What's changed in the 6 weeks by the way?

LOAM · 2 Dec 2012 at 14:27

If he is paying you everything (gross) by your employer you are in effect a "sole trader" and should be registered as such with HMR. YOU, as someone who's is currently self employed will be liable for class 2 NI contributions and required to submit a tax self assessment each April regardless of if your actual income is over the statutory min tax threshold. You currently are paying no NI and it will bite you if you then go and try to claim JSA in the near future, they will ask what you were doing for this period.

If you are already claiming JSA at the moment then that's a whole new discussion.