Factsheet number: 4.0


Last Updated: 27 March 2020

Introduction

You should give a copy of this information to your PA when they start work with you. It outlines details of income tax and national insurance requirements. Please note this information is not applicable to self-employed PAs.

More information on all topics covered here can be found at: www.hmrc.gov.uk and www.disabilitytaxguide.org.uk.

Rules on income tax and national insurance for PAs

Personal assistant employment follows the same rules on income tax and national insurance as all other employment.  Income tax is payable on the income from this job if your wages exceed the personal allowance (see below).  National insurance is payable on the income from this job if your wages exceed the primary threshold (see below).

If you do more than one job, it is the total income that counts for tax – if the total is over the threshold, then you are eligible to pay tax.

It is your employer’s responsibility to deduct tax and national insurance from your wages.  If you do not provide adequate information to your employer, they will have to tax the whole of your PA earnings at basic rate (20%).  You can reclaim any excess tax paid from HMRC, but to avoid overpaying in the first place, it is in your interests to provide adequate information to your employer as quickly as possible.

  • You can earn a certain amount each year (your personal allowance) without paying any Income Tax. In the 2021/2022 tax year the personal allowance is £12,570
  • You can earn up to £184.00 per week (in the 2021/2022 tax year) before you pay National Insurance. This is known as the 'primary threshold'. However, as long as you earn more than the lower earnings limit (£120.00 a week in the 2021/2022 tax year) you can still build up your entitlement to a State Pension and certain other benefits.

What to do if you have a P45

You will receive a P45 from your employer when you stop working for them. A P45 is a record of your pay and the tax that's been deducted from it during the tax year. It shows:

  • your tax code and PAYE reference number
  • your National Insurance number
  • your leaving date
  • your earnings in the tax year
  • how much Income Tax were deducted from your earnings.

A P45 has four parts - Part 1, Part 1A, Part 2 and Part 3. Your employer electronically sends Part 1 details to HMRC and gives you the other three. When you start a new job you give Part 2 and Part 3 to your new employer. You keep the remaining one - Part 1A - for your own records.

Your employer should automatically give you a P45 when you stop working for them as you are entitled to one by law. You should give this to your new employer when you start working for them.

What to do if you do not have a P45

If you don’t have a P45 e.g. because this is your first job or because you have not left your other employment your new employer will give you a starter checklist to complete (used to be referred to as P46).

If you've lost your P45 you will not be able to get a replacement. Your new employer will give you a new starter checklist to complete so that HMRC can give you a tax code for your new employment.

What to do if you are continuing to work in other paid work (either employed or self-employed)

You will need to complete a starter checklist.

Where to find the starter checklist

Your employer can obtain a starter checklist from either their payroll service or from the HMRC website  http://www.hmrc.gov.uk/forms/starterchecklist.pdf (does not work with Google Chrome)

What to do with your completed starter checklist

Your employer needs to send the starter checklist to their payroll service who will temporarily tax you at basic rate on the whole of your earnings from this job.  Once the HMRC has gone through your details, they will notify your employer’s payroll service of the correct rate at which they should tax you.

Employing direct family members

Although quite rare as it is discouraged by Social Services and Continuing Health Care, if someone employs a primary family member, i.e. parent, sibling, step-parent, grandparent, step-child, who lives at the same address then they do not have to pay NI contributions – this applies to both the employer and the employee.

The employee can contact HMRC to apply for NI credits. More information can be found at: www.hmrc.gov.uk and www.disabilitytaxguide.org.uk