Employing a carer with social care direct payments

If you use social care direct payments to hire a personal assistant yourself, rather than buying care from an agency, you are normally their employer. That brings the same duties as any other employer: registering with HMRC and running PAYE, paying at least the minimum wage, enrolling the assistant in a workplace pension if they qualify, and arranging employers’ liability insurance, although the council should fund these costs and can arrange payroll support.

When does someone using direct payments become an employer?

Direct payments are money from the council, made under the Care Act 2014 in England, so that a person assessed as needing care and support can buy it themselves. GOV.UK explains that they are available to disabled people aged 16 or over, disabled parents for children’s services, carers aged 16 or over and older people who need community care services, and that you may become an employer if you pay someone to care for you.

The deciding question is how the care is bought. GOV.UK’s guidance on employing someone in your home says you are classed as an employer if you pay a carer or personal assistant directly, even if the money comes from your local council as direct payments or from the NHS. If you instead pay a care agency, the agency employs the worker.

A personal assistant who genuinely runs their own care business and works for several clients may be self employed, but the ordinary employment status tests apply. Most personal assistants working set hours for one person under that person’s direction will be employees. Our page on the employment status tests explains the factors.

Can direct payments be used to pay a family member?

Usually not if they live with you. Regulation 3 of the Care and Support (Direct Payments) Regulations 2014 makes it a condition that direct payments are not used to pay a spouse or civil partner, a partner living with you as a spouse, or a close relative living in the same household (including a parent, child, sibling, aunt, uncle or grandparent and their spouses or partners). The council can allow it where it considers it necessary, either to meet care needs or to provide administrative and management support with the direct payment. A relative who does not live with you is not caught by this condition, but you would still be their employer.

What PAYE duties follow?

An employer must register for PAYE if, in the current tax year, an employee is paid £96 or more a week, receives expenses or benefits, gets a pension, has had another job, or has received Jobseeker’s Allowance, Employment and Support Allowance or Incapacity Benefit. Even where none of those applies, payroll records must still be kept. GOV.UK also says household employers must run payroll, or pay someone to do it, even if the employee is paid in cash.

Registration must happen before the first payday and cannot be done more than two months before you start paying people. From then on payroll is reported to HMRC on or before each payday, and an employer expecting to pay HMRC less than £1,500 a month can ask to pay quarterly.

There is a useful relief here. Employment Allowance, which reduces employer Class 1 National Insurance by up to £10,500 a year, is not normally available to people employing staff for household work. HMRC’s National Insurance Manual at NIM06520 explains the exception: someone who employs a care and support worker solely for a person who needs care because of old age, disability, illness, mental disorder or past or present dependence on alcohol or drugs can claim it, including where the worker is paid from a direct payment. See our page on Employment Allowance.

Does a personal assistant have to be put into a pension?

Yes, if they qualify. GOV.UK’s guidance on employing someone in your home lists a workplace pension among the rights of an eligible household employee, and the workplace pension guidance says you are usually an employer for these purposes if you deduct tax and National Insurance from an employee’s wages. Nothing in the rules exempts an employer because the wages are funded by a direct payment. Duties start when the first member of staff starts work. For 2026 to 2027 an assistant aged between 22 and State Pension age who normally works in the UK and earns at least £10,000 a year must be enrolled, with contributions calculated on earnings above £6,240 up to £50,270. The legal minimum is 8% of qualifying earnings, of which the employer pays at least 3%. A declaration of compliance must be sent to the regulator within five months of the duties start date. Our guide to automatic enrolment duties has the detail.

What insurance does a direct payment employer need?

GOV.UK’s guidance on employing someone in your home lists employers’ liability insurance among the things a household employer must have. The Employers’ Liability (Compulsory Insurance) Act 1969 itself is framed around employers carrying on a business, but the statutory guidance to councils treats insurance as a cost of the direct payment: paragraph 12.33 of the Care and Support Statutory Guidance says councils should help recipients put the correct cover in place and that the direct payment should include an amount for employers’ liability insurance and any other insurance needed to meet the care plan.

Paragraph 12.30 adds that, if the person receiving care dies, employment liabilities would normally fall on their estate, and that options include using unspent direct payments towards redundancy costs or having insurance that covers redundancy. It is worth asking the council what its scheme provides.

What other duties come with employing a personal assistant?

• Minimum wage. At least £12.71 an hour from April 2026 for workers aged 21 and over. For sleep in shifts, the guidance explains that following the Supreme Court decision in Royal Mencap Society v Tomlinson Blake [2021] UKSC 8, time when the worker is permitted to sleep is not paid working time, but a worker expected to be active for most of the shift is likely to be due the minimum wage for all of it.
• Contract and payslips. GOV.UK says anyone employed in your home must have an employment contract and payslips.
• Statutory rights. Holiday pay, Statutory Sick Pay and maternity pay apply if the assistant meets the eligibility rules.
• Right to work and background checks. You must check the person can work in the UK. Paragraph 12.50 of the statutory guidance notes that individuals cannot apply for DBS checks on other people, so councils should explain how to obtain them.

How do the numbers work for a typical arrangement?

Illustration only. Mr Patel employs a personal assistant aged 30 for 20 hours a week at £13.00 an hour, paid weekly from his direct payment, so she earns £260 a week (£13,520 a year). He has no other staff.

• Pay is above £96 a week, so he must register as an employer and run PAYE.
• Employer National Insurance at 15% applies to earnings above the £96 weekly secondary threshold: £164 at 15% is £24.60 a week. Employment Allowance can cover this because she is a care and support worker.
• Her earnings exceed £10,000 a year, so she must be enrolled. Qualifying earnings are £13,520 less £6,240, which is £7,280, so the employer minimum of 3% is £218.40 a year.

The council should have built these costs into the personal budget. Paragraph 12.27 of the statutory guidance says that where employer National Insurance, recruitment and similar costs will be incurred, they must be included in the personal budget if it is appropriate to meet needs that way, and many councils commission payroll and employment support services.

What goes wrong most often?

• Treating the assistant as self employed simply because the money comes from the council. GOV.UK states plainly that you cannot ask your employee to become self employed.
• Paying cash without running payroll.
• Missing the pension declaration or failing to enrol when earnings rise above the trigger.
• Forgetting that councils may check returns. Paragraphs 12.49 and 12.63 of the statutory guidance say councils may check that PAYE deductions are paid to HMRC and that pay meets the minimum wage, and may review the direct payment if they are not.

Many of the same points apply to other household staff; see our page on payroll for a cleaner or gardener and on employing a nanny.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

• Employing a nanny: payroll and tax
• Employing your first member of staff in a practice
• Carer’s Credit: protecting your NI record
• Reasonable care and reasonable excuse compared
• Social media conduct for accountants

Sources

• GOV.UK: Apply direct payments
• GOV.UK: Au pairs employment law
• legislation.gov.uk: SI 2014/2871, regulation 3
• GOV.UK: Paye for employers
• GOV.UK: Register employer
• GOV.UK: Eligibility
• GOV.UK: Manual page NIM06520
• GOV.UK: Claim employment allowance
• GOV.UK: Workplace pensions employers
• The Pensions Regulator: Earnings thresholds

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.