Paying informal carers
Disabled people and carers
You may receive occasional help from family, friends or neighbours. You might pay them for their help, or just reimburse their expenses or give them small gifts like flowers or chocolates as a thank you. In order to avoid tax implications, it is important to understand the rules around volunteer payments.
If you pay someone for helping you, they may be treated at your employee – see our separate page about Taking on your own PA.
Even if you do not think you are employing someone, you need to be careful. If an individual helps you out on a regular basis, carries out specified duties and is subject to some level of supervision and control, a number of the hallmarks of employment are present. However, there could be other factors pointing away from employment. For example, if they only help you out occasionally, they are free to turn down helping you out and can leave when they wish. Bear in mind that an employment relationship need not be set out in a written contract; rather, it can be oral, or inferred from the circumstances.
What are the tax and other issues if I pay someone’s expenses when they help me out?
Broadly, if you only reimburse any actual out-of-pocket expenses the volunteer has incurred, then there will be no tax or NIC to deal with for either you or the volunteer. The expenses paid must be supported by receipts or be a reasonable estimate of the cost.
What are the tax and other issues if I pay someone more than just their expenses?
If the expenses paid are more than the actual expenses incurred (or accepted ‘scale rates’ in the case of mileage), HMRC may consider the volunteer to be receiving a payment for their services and the payment could be treated either as employment income (meaning you may have to operate PAYE like any other employer) or as other taxable income (meaning the volunteer may have to declare them as ‘miscellaneous’ income to HMRC, as confirmed in this HMRC guidance).
There may also be further complications, such as in connection with the minimum wage to consider.
What are the tax issues on gifts I make to people who help me out?
Volunteers can be provided with a token of appreciation, as long as it is not high value.
However, the gifts should be genuine, one-off thank you gifts. If there is a sense that chocolates or flowers for example, are expected, hinted-at or regularly given, or are a reward for services performed, then they become payment for work done (‘payment in kind’) and again, their value is potentially taxable as either employment income or miscellaneous income.
Where can I find more detailed information?
For more detailed information on the considerations around making payments to volunteers, see our separate page of guidance.