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How do carers pay tax?

  • 6 min read
  • Last updated 17 May 2022

Do you care for a family member? Maybe a neighbour or a friend? If you do, there are allowances and reliefs available to help you. So, how do carers pay tax? Here’s what you need to know about taxes you might have to pay and benefits you could be eligible for as a carer. 

Carer vs Care Worker

Although in essence a carer and a care worker have the same role, let’s take a closer look at what each one entails.

Care WorkerCarer
Employed through an agency, charity, or companyNot employed through an agency, charity, or company
Considered employed Not considered employed
Get paid for their workUsually don’t get paid for their work
Can’t claim Carer’s AllowanceCan claim Carer’s Allowance

A care worker is often referred to as a paid professional carer – someone whose job it is to provide care through an agency, charity, or company. They are considered employed. 

A carer is a person who has undertaken the care of a family member or friend. Most of the time, you don’t get paid. However, you can claim a Carer’s Allowance.

What is Carer’s Allowance?

Carer’s Allowance is an allowance you can claim if you’re caring for another person. 

The criteria is as follows:

  • You care for them for 35 hours or more a week
  • You’re over the age of 16
  • You’re not in full-time education
  • You don’t earn more than £132 a week from employment or self-employment (after deductions such as Income Tax, National Insurance, and expenses)

The person you care for also has to qualify before you’re able to receive Carer’s Allowance.

They must receive at least one of the following qualifying benefits:

  • Disability Living Allowance (DLA) at the middle or higher rate
  • Attendance Allowance at any rate
  • The daily part of Personal Independence Payment (PIP)
  • Armed Forces Independence Payment

So, if you and the person you care for meet the criteria, then you’ll be eligible to claim Carer’s Allowance for the care you’re providing.

The 2022/2023 rate is £69.70 per week. 

You can’t claim more than once, even if you care for more than one person. The upside is that you don’t need to be related to the person you care for nor do you have to live with them. As long as you satisfy the above criteria, you can claim even if you’re caring for your partner, a relative, a friend, or even a neighbour. 

Click here to claim Carer’s Allowance.

How do carers pay tax?

If you only claim Carer’s Allowance, and have no other income or side hustles, then you don’t need to pay tax on this claim. Don’t you love not owing anything in tax?

However, the Carer’s Allowance is taxable. So, if you claim it, and also earn income from another job or personal pension, for example, and go over the Personal Allowance, £12,570, then you owe taxes. If you’re an employee, your employer takes your taxes straight from your salary through PAYE. Thankfully, this means that you don’t need to do anything – phew! You’ll also have to file a Self Assessment tax return if you have other incomes like a side hustle or a self-employed part-time job. You have to declare all your income, including the Carer’s Allowance, to HMRC.

Carer’s tax rebate

As a carer, you cannot claim any expenses if you’re claiming the Carer’s Allowance. 

You are also not eligible for a tax rebate as a carer. 

However if you’re a care worker, someone that is employed by a company or charity, you may be eligible to claim the Mileage Allowance if you travel in your own car to patients. As long as your company doesn’t reimburse you, then you can claim with HMRC. You cannot claim expenses for PPE with HMRC.

Do you own the vehicle you use for work?
Did you buy the vehicle specifically to use for work?
Type of vehicle
How many miles do you drive per year?
If you’re self-employed and use your car for work, you can claim back a flat rate for your usage costs using the Mileage Allowance. If you’re employed, claim the mileage tax relief instead.

Carer’s council tax discount

There are a few benefits you’re afforded to ease day-to-day stresses. If you’re a carer, you might be able to get a discount on the council tax you pay. However, for this particular discount, you must satisfy the following requirements:

  • You live in the same house as the person you care for
  • You provide at least 35 hours of a care per week
  • You are not the spouse or partner of the person you care for 
  • You are not the parent of the child you care for if they are under 18 years old
  • The person you care for claims one of the qualifying benefits (that we mentioned earlier)

If you’ve checked every requirement off the list, then hooray, you qualify! This means you can claim this benefit. You don’t have to claim Carer’s Allowance to claim this discount. 

Can I claim home carer tax credit?

First of all, what is tax credit? Tax credit, also known as carer’s credit, is a National Insurance credit that helps with gaps in your NI record. Your State Pension, which is a regular payment from the government that you’ll receive once you’re of pension age, is based on your NI record. 

The main requirement is that you must be caring for somebody for at least 20 hours per week. However, you also have to be between 16 years old and the State Pension age to qualify. 

The person you care for also has to receive one of the qualifying benefits we mentioned earlier – lots of criteria, we know. 

Here’s a breakdown of how to get National Insurance Credits if you’re a carer:

You’re…How do I get credits?
On Carer’s Allowance You get Class 1 credits automatically
On Income Support and providing regular and substantial careYou get Class 3 credits automatically
Caring for one or more sick or disabled person for at least 20 hours a weekApply for Class 3 carer’s credits if you’re not on Carer’s Allowance or Income Support

How does claiming Carer’s Allowance affect other benefits?

Claiming Carer’s Allowance can affect other benefits you claim. Usually, the amount you get stays the same (or even goes up in some cases), however other benefits you claim may be reduced to balance your payments. It can also affect the benefits of the person you’re caring for.

Some benefits that can be affected as a carer are:

  • Maternity Allowance
  • Bereavement Support Payment
  • Widow’s Pension
  • Severe Disablement Allowance

If you’re claiming any of the above, and are receiving benefits at a rate of less than £69.70 a week, your Carer’s Allowance is topped up to this amount.

However, if you’re receiving more than this amount in benefit payments, you won’t be paid the Carer’s Allowance but you are awarded an underlying entitlement. This is due to the overlapping benefits rule.

To put it in simpler terms – you satisfy the criteria to receive Carer’s Allowance but another benefit pays you too much. Therefore, you get the credit but not the pay.

Some of the benefits of the person you’re caring for that can be affected:

  • Income Support
  • Pension Credit
  • Council Tax Reduction
  • ESA
  • JSA
  • Housing Benefit

The disability benefit or State Pension of the person you care for isn’t affected if you claim. However, the benefits listed above, also called means-tested benefits, can be affected if you claim Carer’s Allowance. Make sure you double check whether or not you’d want to claim and how this can affect you and the person you care for. 

If you need advice on your situation, our tax accountants are on hand to support you. Click here for more information. 

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