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Top tips for paying traders in cash

By Rebecca Milligan

Often when traders complete smaller jobs, they may ask you, or you may choose, to pay in cash. We look at the best way to do this, as well as what is and isn’t above board.
man's hands holding £20 notes in cash

Some people feel uneasy about paying traders in cash, even though this is a common method of payment for many small repairs or home improvements. If you really don’t want to, you can always offer an alternative such as a cheque or BACS transfer. But you don’t need to worry about using cash; it is a legal method of paying for services. Just make sure you go about it the right way.

A choice of payment methods

It’s up to you and your trader to decide how you will pay for their services. You can use cash, credit card, bank transfer or fruit from an allotment if you like – whatever your trader is happy to accept. It’s always a good idea to agree a payment method before your trader starts work. For bigger jobs, they may require a deposit upfront to cover costs of materials or parts.

You should always expect your trader to supply you with an invoice for the amount to be paid. You are not obliged to hand over payment on the day of completion -  in an ideal situation you will have agreed payment terms before the trader starts work - but a standard invoice will ask for payment with a defined period. 

Some traders may prefer to be paid cash in hand to avoid bank charges, or it may just be how they like to do their accounts. However, all traders are required by law to declare any cash payments to HMRC as part of their accounting procedures. This is the trader’s responsibility: as a customer, you can’t control how they do their accounts.

Paying in cash will not affect any kind of insurance claim or liability should the trader damage your property while working, or have an accident themselves during the course of their work. It’s your responsibility to ensure that any trader has adequate insurance before they start.

If you find a trader through Which? Trusted Traders, you can be sure that they will have the correct insurance, working practices and complaints procedures in place. We endorse only traders that pass our assessment process – not all businesses will make the grade.

See our guide on how to work with your trader for a full run-down on how to ensure a smooth process from start to finish. Read on for more tips about paying for work in cash.

Always ask for a receipt

While it is legal to pay cash, it’s always a good idea to ask for a receipt for any cash paid. This can be a physical written receipt, or an email acknowledging payment. Without one, you have no record of what work was done or how much you paid, which leaves you vulnerable should there be a problem with the quality of the work.

Under the Consumer Rights Act 2015, if a trader supplies a service without reasonable care and skill, you have the right to ask them to redo the work or to ask for a reduction in price. However, if there’s no written contract in place, and no receipt for a cash payment, then you may run into problems if the trader won’t co-operate.

VAT payments

If a trader is registered to pay VAT, they should not offer, nor should you ask them, to accept a smaller cash payment in lieu of paying it. Avoiding VAT payment is illegal, and the trader could be risking criminal charges.

Not all traders are registered to pay VAT. If a trader’s annual turnover falls under the VAT threshold (currently £85,000 per annum), it’s up to the individual trader whether or not they register. Traders who are not VAT registered can still give you a receipt, but it will be for a total amount and won’t necessarily separate out the VAT charge.

How to hand over the cash

When you’re paying a trader in cash, it’s good practice to count out the money and check it together. While this may appear over cautious, it’s easy to make mistakes. If either party gets it wrong, you’ve only got your word against theirs if you don’t check at the time of payment.

Even banks get it wrong sometimes. Which? Trusted trader Jason Simmons from Advanced Construction Solutions recalled an occasion where a bank issued £1,000 in a sealed envelope to a customer, which turned out to contain only £900. When the customer returned to the bank and the notes were weighed again, it transpired that dirt on the notes had caused the counting machine to malfunction.

Once you and the trader have checked the amount openly together, the trader can email or write a receipt immediately to create a paper trail.

It’s fine to pay in cash, just make sure you protect yourself by doing it the right way.

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