By Marcus Leach

More small businesses than ever before are dodging the taxman by charging customers in cash, new research suggests.

Up to one-in-10 companies could be taking cash-only payments in a bid to hide their full earnings from HM Revenue and Customs (HMRC), it is claimed.

Sole traders who earn more than £37,400 fall into the 40% tax bracket, and for every job over £1,000 they could save about £500 if they avoided paying National Insurance and income tax.

There is no law against receiving cash, but the onus is on businesses to make the correct earnings declaration.

Experts believe the cash-in-hand culture is being driven by a boom in entrepreneurs, many of whom lost their jobs in the recession and started-up on their own.

Up to £50million could be being “squirreled away” by plumbers, electricians, window cleaners, gardeners and other sole traders every year.

But a spokesman for Crunch Accounting, which polled 1,000 new and small businesses across the UK, said cash-only payments are liable to continue.

“The fact is that cash-only payments are beneficial to everyone but the Inland Revenue. They present the trader with a lower tax bill, and also drive down cost. From our research, we believe cash-only payments are on the increase," she said.

“Obviously, all consumers should strive to stick to the law, but it would take a consumer made of granite to argue with anyone who offers a job at a discount.”

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