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Dealing with cash as a tradesperson

Reading time: 3 minutes

For some reason, tradespeople and cash are closely linked in people's minds. Experienced tradesman Carl Goulding looks at why, and how you should handle it...

Tradespeople and cash have a bad reputation, so I should say up front: there’s nothing wrong with being paid in cash. Money is money, however you get it. But dealing in cash does have its issues, which means it probably shouldn’t be your preferred way of getting paid.

Cash and tax

First off, let’s address the elephant in the room: tax.

There seems to be a common misconception that just because someone pays you in cash, you’re somehow obliged to stuff it under your mattress where HMRC can’t find it. That shouldn’t be the case. Receiving cash payments is perfectly legal and above board, you just need to log it on your books as income and pay the correct taxes that are due on it.

Stuffing rolls of twenties in a shoebox and pretending you didn’t get paid can land you in serious trouble down the line. Don’t get me wrong, it can be very tempting to do the odd job for ‘a bit of cash’, but is it really worth it? Okay, you skip the hassle of dealing with some paperwork, and maybe save yourself a bit in taxes at the year’s end, but the reality is, cash has a dark side - and it’s not just the risk of personal bankruptcy if your unpaid taxes get found out.

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Proving your income

If you are receiving payments at all, then I assume you’re running a business, and of course payments are the lifeblood of that business. What you may overlook though is that it is the record of those payments that will help you in so many ways later on. You want to lease a new van? Prove how much money you made last year. Want to get a mortgage? Prove how much money you made in the last three years.

How about this: a customer is taking you to court when a job you didn’t declare goes wrong? That could be awkward. What about when someone refuses to pay you and you have no record of anything because you did it all ‘off the books’? Ask yourself. Who wins and who loses if you get paid cash? I bet you lose most times.

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Customer discounts

Many of you will say: "I don’t ask for cash!"

In more than a decade as a tradesman, I found that a lot of customers wanted to pay by cash - not that I wanted payment in cash. So why does your customer want to pay in cash? One word: discount.

The implication is that somehow you will make a saving by getting paid cash - and the only way that is possible is if you dodge the tax. Is it worth it?

At first, you may see this as a good way to secure some work, a way to be competitive, but the reality is that you’re taking on a huge gamble you don’t need to. The customer isn’t the one who suffers if you get caught. It’s you who takes the risk of destroying your business and your future, just to save someone a few quid on their job.

When I used to get asked if I would accept cash I used to take pride in saying, of course. Then when asked how much I could discount by, I would take even more pride in saying “nothing”.

Accept cash as payment by all means, but always keep a record and declare it. Look after your future business and future you. Don’t make life harder for yourself down the line to save a customer a bit of money now and, if no one wants to pay you your asking price, perhaps you need to review your prices.

You should be charging enough to earn a living...after paying your taxes.

Accounting and tax