As a Shared Lives carer you are self-employed and are responsible for your own tax and national insurance. This quick guide offers some basic advice on how to get started and what tax benefits you are entitled to, such as qualifying care relief. You can also download our full guidance, with additional examples, at the bottom of the page.
You will need to register as a self-employed person for tax and national insurance with HMRC when you are ready to start offering a Shared Lives arrangement.
You can do this online at: www.gov.uk/register-for-self-assessment or by phoning HMRC on 0300 200 3310 (Don’t answer any of the questions on the automated service and you will eventually be put through to an advisor who can register you). HMRC will then send you a Unique Taxpayer Reference (UTR) number which you will need before you can complete your tax return.
If you want to fill in a paper self-assessment form rather than completing your return on-line you can request one to be sent out to you by phoning 0300 200 3310. If you are the only Shared Lives carer in your household, you register as a ‘sole trader’: if you are a joint carer, and the payments you receive are in both your names, you will each need to register. This will mean you will share both the qualifying allowances explained below.
Once you are registered as self-employed, you’ll be asked to send in a tax return each year, covering the period 6 April the previous year to 5 April in the current year. You have until 31st October following the end of the tax year to send in a paper tax return, or until 31st January following the end of the tax year to send in your tax return online. If you register online you will usually be sent email reminders to prompt you to send in your tax return on time.
As a Shared Lives carer you can claim ‘qualifying care relief’ and it is available whether you offer longer term shared lives arrangements, respite, shared lives day support or any combination of the three.
Qualifying care relief is a tax allowance that allows you to claim £10,000 as a Shared Lives household per annum, in addition to £250 a week for each individual you support for a week or part of a week. The number of individuals Shared Lives carers can support as part of your household at any time is three in England and Wales and two in Scotland. (£12,500 for the year 2019 -2020).
There are 2 methods of calculating any income tax you may be liable for as Shared Lives carers:
The simplified method – you pay tax on the income you have received as a Shared Lives carer during the financial year minus your ‘qualifying amount’ (see below for further information) This is the method which most Shared Lives carers choose to use.
Profit method – where you pay tax on your Shared Lives income during the financial year minus any eligible expenses and capital allowances as a Shared Lives carer. If you use this method, you need to keep detailed records of all your expenses relating to your role as a Shared Lives carer throughout the tax year and keep any receipts as evidence for HMRC.
If the amount of money you receive as a Shared Lives carer (your ‘receipts’) in the tax year is less than your ‘qualifying amount‘ you will not pay income tax on your Shared Lives income for that year. However, any Shared Lives income you have received for that tax year that is over your ‘qualifying amount’ is your ‘profit’ and you will pay income tax on that ‘profit’.
Your ‘qualifying amount’ consists of two parts which should be added together:
Your total receipts are: