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From 6 January 2024, the main rate of class 1 National Insurance contributions (NIC) deducted from employees’ wages is reduced from 12% to 10%. From 6 April 2024, the main rate of self-employed class 4 NIC will reduce from 9% to 8% and class 2 NIC will no longer be due. Those with profits below £6,725 a year can continue to pay class 2 NIC to keep their entitlement to certain state benefits. Our guidance will be updated in full in spring 2024.

Updated on 6 April 2023

Minimum wage, tax and tax credits help for care workers

Care workers can face some challenges when it comes to understanding their minimum wage, tax and tax credit positions, as these can be made very complex due to the nature of care work and the travel patterns involved. Here, we give you an overview of some of the main issues and tell you where to get more help.

Content on this page:

National minimum wage

The national minimum wage/national living wage (NMW/NLW) is the minimum pay per hour most workers are entitled to by law. You can find more information on our page National minimum wage.

Working out hours worked

If you are paid on an hourly basis (see under the heading Hourly paid calculation on our National minimum wage page), the calculation to work out if you have been paid the minimum wage involves taking your ‘minimum wage pay’ and dividing it by the number of hours worked in that pay period. The result should be equal to or above the minimum hourly rate for your age.

It is fairly straightforward to work out if you have been paid the minimum wage if you work a set number of hours at one fixed location. But if your working hours are fragmented and you spend a lot of time travelling around, as is often the case for care workers, then it is more complicated.

For care workers, you still take your minimum wage pay and divide it by the numbers of hours worked in that period. But the number of hours worked in a period will generally include the time you spend working in your clients’ homes (contact time) as well as the time spent travelling between your different clients during the day. The number of hours worked in a period does not include travel time between home and a place of work (including your clients’ homes) or any resting time (see below under the heading: Travel between home and work).

Example

Jo, 37, is a home care worker. A typical day for Jo looks something like this:

Time Activity
7.10am Leave house
7.20am to 8.05am First appointment, followed by 10-minute drive to:
8.15am to 8.45am second appointment, followed by 10-minute drive to:
8.55am to 9.40am third appointment, followed by 5-minute drive home
9.45am to 12.10pm gap spent at home
12.10pm leave house
12.15pm to 12.45pm fourth appointment, followed by 5-minute drive to:
12.50pm to 13.35pm fifth appointment, followed by 10-minute drive home
1.45pm to 3.50pm gap spent at home
3.50pm leave house
3.55pm to 4.55pm sixth appointment, followed by 5-minute drive to:
5pm to 5.45pm seventh appointment, followed by 15-minute drive to:
6pm to 6.15pm eighth appointment, followed by 10-minute drive home
6.25pm arrive home

 
Jo’s total working hours for the day, for minimum wage purposes, are six hours (5 hours and 15 minutes client ‘contact’ time and 45 minutes travel time). Neither her home to work travel, nor time spent at home counts for minimum wage purposes (although her home to work travel should be recognised for tax purposes which means she may be entitled to tax relief on her home to work travel expenses – see the heading below: Travel between home and work).

Working out minimum wage pay

When calculating your ‘minimum wage pay’ (see the heading Hourly paid calculation on our National minimum wage page) you should include any pay premiums you have received (for example, for weekend work) or costs you have incurred in connection with your work that are not reimbursed by your employer (see below under the heading: Unreimbursed costs).

If you receive a payslip, the starting point for working out your minimum wage pay will generally be the ‘gross’ pay figure – it may not be actually called this, but it is basically the figure circled in red on the graphic below. The graphic shows that the figure in this instance is referred to as ‘total payments’. 

A payslip showing total payments of £273.75. From this total, deductions are made of national insurance of £13.41 and tax of £9.20. Total deductions are £22.61. Net pay is therefore £251.14.
Canva.com

As stated above, from this figure you can deduct certain costs that you have incurred that are connected with work and that are not reimbursed by your employer. This will have the effect of reducing the amount of pay you are taken to have received from your employer.

For care workers, a typical example of such costs is travelling between clients (but not the costs of travelling between home and work). For minimum wage purposes, we understand that where care workers are using their own cars to travel between clients, ‘costs’ are probably limited to actual petrol expenses rather than including any contribution towards wear and tear or other vehicle related expenses. If you use your car for both work and private purposes, it can be hard to work out the specific cost of the petrol used in travelling between clients. However, if you keep a mileage log as part of your records, the appropriate percentage of work use can be identified and so, therefore, can your costs.

Example

Keith is a 40-year-old care worker, paid monthly. His working hours for minimum wage purposes in May were 110 and he received gross pay of £1,150. He travelled 200 miles in his own car during May. 125 of these miles were for travelling between his clients. If his total petrol costs during May were £40 then he will be able to work out that his specific petrol costs of travelling between clients were £25, by doing the following calculation (£40 x 125/200). As this £25 was not reimbursed to Keith by his employer, Keith can deduct £25 from £1,150 to work out his pay for minimum wage purposes, which is therefore £1,125.

To work out if Keith has been paid the minimum wage, we need to take his minimum wage pay and divide it by the number of hours worked in that period. £1,125 divided by 110 is £10.22, so Keith has been underpaid the minimum wage (his minimum hourly rate is £10.42, which means he should be paid at least £1,171.20 for 110 hours and £25 costs). For completeness, if Keith’s employer had reimbursed him his £25 costs, his minimum wage pay would be £1,150 (resulting in an hourly rate of £10.45) and there would be no breach.

Differing rates for contact time and travel time

It is quite common for care workers to receive different pay rates for different ‘types’ of work – these all count when working out pay for minimum wage purposes.

Example

Sasha is paid at a rate of £11.00 per hour for ‘contact’ time and £5 per hour for travel time. Her total pay for the day is £61.50 (5 hours, 15 minutes at £11.00 per hour (£57.75) and 45 minutes at £5 per hour (£3.75)). Assuming that this is the only day’s work in her pay period, we need to take her minimum wage pay of £61.50 and divide it by six hours (her total working hours), which is £10.25. As this is less than £10.42, Sasha has been underpaid the minimum wage.

Travel between appointments

Many care workers do not get paid for their time or costs of travelling between clients at all. This can have knock on effects on their tax and tax credits position (as we describe further below on this page), but it can also cause problems with the national minimum wage.

However, it is not unlawful for care workers to be paid only by reference to their ‘contact time’ (time spent with clients), provided their pay averages out at or above the minimum wage, once any time spent travelling between clients and associated out-of-pocket expenses are also factored in.

Example

Alison, 27, is paid weekly at £11.90 per hour with no reimbursement of expenses. One week, her employer pays her £357 for 30 hours work (30 x £11.90). These are the hours that she spent with clients in their homes. She spent three unpaid hours that week travelling between clients and incurred petrol costs of £20 in doing so.

To work out if Alison has been paid the minimum wage, we need to take her minimum wage pay and divide it by the number of hours worked in that period. Alison’s minimum wage pay for the period is £337. This is the £357 paid by her employer less the £20 unreimbursed expenses. The number of hours that Alison has worked in her weekly pay period are 33 hours. This is the 30 hours of time she spent with clients plus 3 hours of travelling time between clients. Dividing £337 by 33 gives us an hourly rate of about £10.21 an hour. As Alison is aged 23 or over, she should have been paid at least £10.42 for each of the 33 hours she has worked (a total of £343.86). As she was paid above £343.86 (i.e. above the NLW amount), no arrears are due even after taking account of the additional 3 hours unpaid working time.

The next week, she got paid the same amount (£357) but spent five unpaid hours travelling between clients. The minimum amount paid to her should be £364.70 (£10.42 x 35). She has been underpaid by £7.70.

We can see from this example that care workers who are paid like this, who receive lower pay rates per hour, are at risk of being underpaid when travel time and costs are factored into the minimum wage pay calculation. It is therefore vital that you regularly check your wages against travel time and costs.

Travel between home and work

It is not currently a requirement under minimum wage law that care workers are paid for their travel time from home to a place of work, nor associated travel expenses. This is despite the fact that client demand may mean that you have some long breaks in your rota when there is really nothing to do except go home.

Interestingly, if you were to travel to the office to sit out a break rather than going home, then the amount of time spent travelling to and from the office would count as ‘working time’ (although the time spent ‘resting’ there would not). There are some useful examples looking at care workers and travel time/resting time on GOV.UK.

Confusingly, home to work travel is usually recognised as being part an inherent part of a care worker’s duties for tax purposes. This means that the tax system should allow you to make a tax deduction for all your travel costs – even the home to work ones (see below).

Contacts that are cut short or overrun

Sometimes employers may schedule appointments that are very short or without leaving adequate time for travel in between them. Often you may feel forced to cut time off of calls in order to arrive at your next call on time or finish calls in your own time, yet will only get paid based on time you were due to work.

For minimum wage purposes, what is important is not what is written down on your rota, but what actually happens in the course of the day. It will therefore be vital that you can correctly identify your actual working hours and costs. Keeping clear, detailed, well-maintained records of your contact time, travel time and costs incurred will help you do this – this can be on an excel spreadsheet perhaps or even just be written down by hand in a journal that you keep in your car – we provide an example below of how you could set things out. 

A timesheet showing a carer’s travel expense log, noting down activities of the day with their start and finish times, mileage associated with the activity, and any additional notes relating to each visit.
Canva.com

This will not only help you in the event of a dispute as to whether you have been paid the minimum wage, but may be useful more widely – for example when thinking about making a tax claim for your mileage (see below).

Example

John leaves his second appointment (which should have been half an hour) five minutes early to get to his next appointment on time (so that it was actually only 25 minutes long) but then spends an extra 15 minutes at his third appointment.

John’s full day should have been 6 hours, but his total working time for minimum wage purposes is 6 hours, 15 minutes. The minimum amount paid to him should be the hourly rate of £10.42 for six hours, 15 minutes, i.e. £65.13. If he is paid in accordance with what is written down on the rota, i.e. £61.50, then he has been underpaid by £3.63.

Unreimbursed costs

Where a care worker incurs costs in connection with their employment that are not reimbursed by the employer, including expenses for travel between appointments, these reduce the worker’s pay for minimum wage purposes.

Example

Peter, 27, is paid weekly at £11.90 per hour. One week, his employer pays him £357 for 30 hours work (30 x £11.90). He spent three unpaid hours that week travelling between clients. Peter incurred £20 of travel costs for those three hours of travelling, meaning his pay would be taken to be £337 not £357.

When we compare this to the bare minimum he should have received, £343.86, (£10.42 x 33 hours) he has been underpaid. In fact, any more than £13.14p of unreimbursed costs for those three hours of travelling would constitute a breach of the minimum wage rules (that is, £357 less £343.86).

For minimum wage purposes, we understand that where care workers are using their own cars to travel to between clients, ‘costs’ are probably limited to actual petrol expenses rather than including any contribution towards wear and tear or other vehicle related expenses.

All of this means that, in practice, employers should consider reimbursing fuel costs in full on top of a national minimum wage hourly base rate for workers who are on or around the national minimum wage. This will ensure the employer does not fall foul of the NMW rules. Alternatively, employers may need to increase the worker’s hourly base rate so that there is enough ‘head room’ in it, to absorb the fuel costs without taking their average pay below the NMW.

If you are paid more than the minimum allowed by law, then whether your travel time and costs are paid/reimbursed is a matter for negotiation between you and your employer. You should check any contractual terms and conditions you sign up to, very carefully.

More information

For more information, including what to do if you think that your employer is not paying you the full minimum wage to which you are entitled, see our page National minimum wage.

There is a comprehensive employer guide to calculating the NMW and NLW produced by the Department of Business, Energy and Industrial Strategy that you may find helpful.

Travel costs

For tax purposes, many care workers will be able to deduct all their travel costs from their taxable income, including those related to home to work travel. This is because, like a ‘service engineer who moves about from place to place during the day, carrying out repairs to domestic appliances at client’s premises’ (wording taken from HMRC’s manual), their duties inherently involve travelling. Even if you do not have a travelling appointment, it is likely every place that you attend is a temporary workplace, which also means that relief should be due.

There is information on the rules for travel expenses on our page Employment expenses: travel.

Where the rules apply to a journey, and you incur rail, bus, and other transport charges, to the extent they are not fully reimbursed (or reimbursed at all) by your employer they can be claimed as a tax deduction.

If you use your own transport for such journeys (for example, your own car) there is the statutory system of tax-free approved mileage allowances for business journeys available. If your employer pays less than these amounts, you can claim tax relief for the unused balance of the approved amount.

The mileage rate covers the costs of running and maintaining the vehicle, such as fuel, oil, servicing, repairs, insurance, vehicle excise duty and MOT. The rate also covers depreciation of the vehicle. This is a bit more generous than what you are allowed to deduct to arrive at your pay for minimum wage purposes (only petrol).

Note that there is some HMRC guidance that suggests that where care workers are agency workers, they will only accept that the cost of travel between different jobs on the same day is allowable, and they will not accept a deduction for the cost of travel from home to the first job of the day or to home from the last job of the day. We are not clear what HMRC are basing this interpretation on. Indeed, there has been a case where HMRC’s stance on this has been called into question. This should, by no means, be relied upon and it is very important that care workers keep good, detailed mileage records.

Claiming tax relief

Even if you meet the rules on allowable travel, you need to have paid enough tax to get tax relief. In 2023/24, you will usually pay tax on your earnings over the personal allowance (£12,570). In other words, if your income is less than £12,570 you will not be able to get any tax relief on travelling expenses that are not reimbursed by your employer.

Example

Josie earns £13,000 in 2023/24. After the personal allowance is deducted, she will have taxable income of £430, which at 20% means that she will pay £86 tax. She has qualifying expenses of £100 which she has paid for from her salary. By putting in a tax claim for this, she will not get the £100 back from HMRC, but will get the tax back that she has paid on the £100. As she has paid tax at 20%, this will be £20. Even though she will also have paid 12% National Insurance on the £100, there is no National Insurance relief available.

If Josie’s expenses were £600, her tax claim would be restricted to £430 and her refund restricted to £86.

To get tax relief, you have to make a claim to HMRC, but it is quite straightforward. If you do not usually have to complete a tax return, a claim can be made on form P87.

Where the amount of employment expenses exceeds £2,500, then the tax refund claim must be made through the completion of a more formal self assessment tax return.

Tax credits and universal credit

Travel costs

A person’s entitlement to working tax credit is based upon his/her level of taxable earnings – against which permitted tax deductions are taken. Permitted deductions can include travel expenses that you are entitled to tax relief for, but which are not reimbursed by your employer.

This means that where £50 of a care worker’s £275 weekly earnings are attributable to travelling expenses, they will have an annual income for tax credit purposes of £11,700 (£225 x 52), rather than £14,300 (£275 x 52), potentially meaning a higher tax credit award.

For tax credits, employment expenses are deducted from income if they are allowable for tax, even if full effect cannot be given to them for tax purposes because the worker does not earn enough to incur a tax liability.

A similar rule applies for universal credit.

Example: mileage and universal credit

If a care worker does 10 miles travelling a day for work, for say, 46 weeks a year, and her costs are unreimbursed by her employer, then her mileage allowance relief claim would be £1,035 (10 x 45p x 5 days x 46 weeks). This means her earnings for universal credit purposes in each monthly assessment period could be reduced by £86.25 (£1,035 divided by 12). Universal credit's ‘taper rate’ of 55p in the pound means that a £86.25 deduction could result in a £47.44 increase in her universal credit award depending on her level of award and circumstances.

However, you should be aware that both tax credits and universal credit can use earnings information received by HMRC from employers to set awards, which does not include unreimbursed expenses amounts. You will therefore need to provide HMRC (for tax credits) or the DWP (for universal credit) with revised earnings amounts.

You can find more information on how to do this for tax credits on our specialist site, RevenueBenefits.

For universal credit, we understand this can be done via your UC online account journal (for more information see GOV.UK).

Unpaid travel time

Working tax credit (WTC) is payable to claimants who are in ‘qualifying remunerative work’ and who are on a low income. The number of hours required will depend on your circumstances as set out in the guidance on our website.

Qualifying remunerative work is work for which the claimant is, or expects to be, paid. There is an issue for care workers here: if your employer does not pay you directly for your travel time (even if your overall remuneration at least equals the minimum wage) then those travel hours do not count as paid work for tax credits. This means that your weekly remunerative hours may be insufficient to meet the minimum WTC requirement.

If you are in this situation, you could try talking to your employer about making changes to your terms and conditions.

For universal credit, you do not need to work a minimum number of hours to qualify but there may be a minimum amount that you are expected to earn. This will be agreed between you and your work coach, as part of your claimant commitment.

Fluctuating hours

If your weekly hours of paid work change this can affect entitlement to working tax credit (WTC), as there are rules about how many hours you have to work to qualify. However, the working hours rule in tax credits depends on the hours of work you normally do per week and so, often, fluctuations of a few hours week by week will not make a difference as long as you normally continue to work the minimum required for your circumstances. If things change significantly so that your normal weekly hours of paid work change, you will need to tell HMRC as this could affect your award.

You may be entitled to more money if your hours increase and you start to normally work at least 30 hours a week, or your WTC may reduce or stop if you reduce your hours below one of the thresholds. Note that while your income, as well as your hours, may fluctuate, the disregard system provides some cushioning for tax credits purposes, meaning that your income can rise or fall by £2,500 compared to the previous year before your tax credits are changed in the current tax year.

For universal credit you do not need to work a minimum number of hours to qualify but there may be a minimum amount that you are expected to earn. This will be agreed between you and your work coach, as part of your claimant commitment.

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