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How is self-employed cash in hand work taxed?

  • 3 min read
  • Last updated 15 Apr 2025

It can be tricky to work out how self-employed cash in hand work is taxed. While most of us prefer money to land in a bank account, on-time and with the appropriate invoice number as a reference, the reality is that sometimes a client will pay you cash in hand. 

If you’re employed, you receive a payslip detailing your salary, pension and tax, like Income tax and National Insurance contributions (NIC). In this case, you need to keep an eye on your tax code and make sure it correctly reflects your situation. You can use our tax code checker to see what the letters mean and how they relate to your salary.

Your payslip also outlines how much tax and NIC you have paid over the past year. 

If you’re paid cash-in-hand, however, you report your earnings to the government yourself via a tax return.

If I’m earning cash in hand, do I have to do a tax return?

Just like if your earnings are paid into a bank account, you declare any cash in hand earnings on your Self Assessment tax return to HMRC. Here’s when to do this plus the other relevant deadlines.

Key dates in the current 2025/26 tax year 👇

Deadline Date Year
Tax year starts 6th April 2025
Tax year ends 5th April 2026
Register for self assessment 5th October 2026
Pay tax bill by PAYE salary 30th December 2026
Self assessment deadline 31st January 2027

How is self-employed cash in hand work taxed and how much is it?

Tax on any income is made up of Income Tax and National Insurance, and cash in hand is no different. The rate of Income Tax that you pay in the current tax year is based on how much you earn.

The income tax rates in the 2025/26 tax year 👇

Income Tax rate Tax band
Up to £12,570 0% Personal allowance
£12,571 to £50,270 20% Basic rate
£50,271 to £125,140 40% Higher rate
over £125,141 45% Additional rate

When it comes to National Insurance, the point when you start paying this is the same as that for income tax. When you earn more than the personal allowance: the tax-free portion of your income.

National Insurance rates in the 2025/26 tax year 👇

NI class Who pays? How much?
Class 1 Employees earning over £12,570 8% on earnings between £242 and £967 per week

2% if you earn £967+ per week

Class 1A/1B Employers 15%
Class 3 Voluntary contributions £17.75 per week
Class 4 Self-employed earning over £12,570 6% on profits between £12,570-£50,270

2% on profits over £50,270

How can I keep track of cash in hand payments?

Keeping track of self-employed income is always important for tax purposes. But it’s even more important if you’re paid cash in hand. This is because there’s no digital record of the payment. 

You need to keep track of cash in hand self-employed earnings to ensure you pay the correct amount of tax. You must also be prepared to provide HMRC proof if they should launch an investigation into your earnings. 

As long as you’re keeping good records, there shouldn’t be anything to worry about. But here are some of the key things you should be doing to keep track of cash in hand earnings. 

  • Issue invoices – by doing this, you not only have protection should someone be late or refuse to pay, but you also have a digital or paper record of when the work was done, what it entailed and how much they owe you.
  • Issue receipts and keep a copy – upon payment, issue a client a receipt. Keep a copy for yourself to show when you were paid.
  • Make a spreadsheet of earnings – keep everything you need to know in one place with a simple spreadsheet. Keep a record of dates you issued an invoice, what work it was for, when you were paid and if you were paid in cash or into a bank account. 

If you have paper receipts or invoices, make digital copies of them all. That way if you lose data, or you’re investigated by HMRC, you can more easily resolve it.

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