Pension if you e always worked cash in hand

[Silverbook55]

I’m currently having work done in the house. The person doing it requested cash in hand- I have no issue with this. They made a few one liners about avoiding the tax man which made me think- if you genuinely work this way for the majority of your life and choose not to pay NI- do you get a state pension?

Surely there will be people who have done this but they can’t be left pension-less…or are they?

They'd get pension credit

Yes they'll get the minimum pension credit.

I imagine that what they're doing is telling HMRC that they're earning just below the personal allowance level each year, and also paying their SE NI payments to ensure they're going to get the state pension. Any money over and above the PA level will be pocketed gross.

I've seen many self assessments over the year in the course of my job where it's bloody obvious that's what's happening. (Which is all very well and good until you have a bad accident and want to claim for loss of earnings, at which point your tax evasion comes to bite you on the arse. Shame!)

They'll be putting enough sales through the books to make it look legitimate and pocketing a proportion. It's highly unlikely that none of their sales will go through the books.

If at the lower earnings level (i.e. part time, unskilled work), they'll be putting enough through the books to get over the NIC threshold so they get NIC credits for state benefits and also maximise tax credits/universal credit by putting through the sales for the "right" number of working hours they need for benefits. The cash stuff they pocket is their spending money on top of their benefits and tax free.

For higher levels of income, i.e. full time tradesmen, they'll be doing unrecorded cash to avoid breaching the VAT threshold. They'll probably also be paying "subbies"/casual workers cash in hand out of it to avoid employers NIC and facilitate tax evasion and benefit fraud of their subbies/casual workers too who likewise won't be paying tax and probably claiming benefits.

The thing is, they're not even doing it on the quiet anymore. We phoned up a local shed firm for a price for replacing the roofing felt - first thing the guy said on the phone was asking whether we'd pay cash as he could "knock off the VAT" - that's a random customer he'd never met before and could easily have been a tax inspector! Same when we spent £2.5k on a car repair after an accident - two different body shops offered to "knock off the VAT" if we'd pay cash and give them a couple of weeks to do it as they'd do it at weekends and pay "the lads" in cash! Same with spending £2k on scaffolding - legimitate local firm - offered "VAT free" if we paid in cash without us even asking.

The "black economy" is the largest component of the UK tax gap. It's time HMRC took it seriously again - they used to do but seem to have given up over the past 20-25 years.

Many benefits will credit NI contributions, eg Child Benefit, UC, new style ESA, contributions based JSA, Carer's Allowance, Carer's Credit. So they could be getting NI credits unrelated to working and would not require payment of Class 2/3 contributions.

Or when they try and get a mortgage based on their £10k a year income

Exactly - I felt quite happy that those who were hiding money got way less payouts over covid. And listening to them complain... they didnt have a leg to stand on

They'll probably be claiming housing benefit, living in council/social housing, so probably never likely to want to own a house, especially if lower earners anyway. They'll get housing benefits for life. Especially if none of their "cash" income is declared as they may be living on unemployment benefits.

Different types of fraud/evasion at different levels of income.

There really weren't 3 million excluded because they were fiddling their taxes. Not saying there weren't any, but huge numbers of honest freelancers/self employed people were excluded on a variety of reasons, plenty of whom wasn't because of fiddling their figures. It was because of a number of patently stupid and illogical exclusions. Unfortunately mud sticks, so the vast majority of the 3 million were entirely innocent and victims of circumstance but the "hard of thinking" put everyone in the same boat as tax evaders, including politicians!

@LastHeraldMage yeah, the evaders being caught out in the pandemic amused me greatly

This. People on these threads always go on about big companies. But the main source of tax evasion in the uk is from small businesses like op is talking about

I too don't know why this isn't addressed more.

I've heard in the past they have two sets of books.

One for tax and benefits purposes and one for things like mortgages or to support loss of earnings claims if a taxi driver's car is off the road or a tradesperson cannot work due to injury.

Of course the latter is never submitted to HMRC and it could be that lenders and insurance companies are now wise to this plus any request for sight of a tax return or bank account which is more likely these days would show exactly what they're up to.

But to answer the OPs question, many people who don't officially earn much money receive NI credits which gives them a full state pension plus they could be entitled to pension credit or help with rent if they don't have a full state pension so they get the money anyway whether they've paid for it or not.

A relative of mine did some cash in hand work on a fairly small scale and hid some of his excess money in gold. His widow found about £20k worth that she had no idea existed in the back of his shed after he died.

Probably because HMRC is under resourced like all public services and the chances of an investigation of any particular individual leading to discovery of significant tax fraud is small.

Most will be honest or possibly only cheat a very small amount that will be impossible or hard to detect and it will take quite a lot of work to find the people under declaring by thousands that make the investigation worth while.

The amalgamation of the different tax agencies and then the closure of the town centre tax offices did massive harm - thanks Gordon! Huge numbers of experienced tax inspectors took early retirement/redundancy when their town centre office closed down as they didn't want to relocate potentially hundreds of miles to one of the small number of big tax centres. Replaced mostly by call centre workers on little more than minimum wage with a few weeks of basic training. Who'd have thought tax evasion would get worse when people barely capable of giving basic tax advice had replaced experienced tax inspectors who could spot a bit of tax evasion just by looking at accounts/tax returns - most current tax office workers don't even know the difference between a sole trader and a limited company, and certainly don't understand accounts nor what double entry book-keeping means - they've not got a hope in hell's chance of performing a competent tax enquiry/investigation on a small business!

But added to that were tax credits which Gordon decided would be run by HMRC. Took up a lot of HMRC staff/resources taken away from tax work and put onto benefit work instead.

And lots of HMRC staff spend their time on added complications, such as the £60k threshold for child benefit, the £100k threshold for loss of personal allowance, marriage allowance transfer. The whole thing get more complicated every year, so staff are stretched further and further.

Mortgage companies require sight of the sa302 which is the tax calculation issued by hmrc following submission of the tax return

So if you're paid in cash how do you spend it (ie so much is online via direct payments and not cash) or do they put it into a bank account and hope no one picks them up on it?

I know somebody like this. In his 60s, odd-jobber cash-in-hand, says he doesn’t even have a bank account. Is a groundsman in a caravan park and lives there in lieu of pay, so no rent even. I don’t think he’ll get a pension as how would they even pay it to him?

He will probably be paying a self employed contribution. But will be declaring much smaller earnings.

All groceries, petrol, any food and drink out of the house, clothes, gas and electricity top ups rather than DD, buy your appliances and tech (mobile phone, games console etc) from shops rather than online.

If you pay subcontractors or do something like run a takeaway, pay delivery drivers in cash. Likely other ways too. Just because some people rarely or never use cash, doesn't mean others don't.

We use Costco and when you're queuing to pay you'll always see people buying bulk soft drinks, bottled water, toilet roll, food etc and when they pay, a great wad of notes come out.

Very likely some of those people run convenience stores or takeaways and are using the takings to pay. Whether or not they're declaring it, they're saving the banking fees that they'd pay if they banked the cash or people had paid by card.

Why do you have no issue with helping someone evade their tax obligations? Why should those of us on PAYE pay our fair share while others don’t? Someone has to pay for the infrastructure we all benefit from.

As do solicitors in relation to injury / loss of earnings claims.

HMRC need to do far more about this. They can easily review lifestyle and establish if someone has a house, cars etc that they cannot possibly have paid for with declared earnings/ inheritance which has gone through HMRC’s systems.

As for claiming pension credit, if someone has no NI record as they’ve not been claiming benefits or working then this should automatically trigger an HMRC investigation and pension credit should be denied if they cannot evidence what they were in fact doing for all those years. Why should the taxpayer pay for anything for them in retirement if they were contributing nothing to society whatsoever at working age?