A home care agency sells time in short visits, scattered across a town, paid for by councils, the NHS and private clients at different rates. Carers are paid by the hour, travel between visits, and are protected by minimum wage rules that count much more than contact time. Margins are small enough that a few minutes per visit decides whether the business is viable.
Income by funder
| Funder | Typical terms |
|---|---|
| Local authority framework or spot contract | hourly rate set by the council, invoiced from actual visits, often through a council portal |
| NHS continuing healthcare | rates agreed per package |
| Private (self-funding) clients | your own rates, invoiced weekly or monthly |
| Direct payments and personal budgets | clients pay from their budget; treat as private |
Use one income account per funder type, and invoice from the rota or call-monitoring system, not from planned hours. Councils increasingly pay on actual logged time; differences between planned and actual are lost income if nobody reviews them.
VAT: the welfare exemption
Care services supplied by a provider registered with the relevant regulator (the CQC in England, and the equivalent bodies elsewhere in the UK) are generally exempt from VAT as welfare services. Most care agencies are therefore not VAT registered, and VAT on costs is not recoverable. Services that are not welfare in nature, such as pure domestic cleaning with no care element, may not share the exemption. HMRC’s guidance on welfare services and goods sets out the conditions.
Carer pay and minimum wage
Minimum wage compliance for care workers is a common cause of HMRC enforcement. Time that counts as working time includes:
- travel time between visits (but not travel from home to the first visit and from the last visit home, in most cases);
- mandatory training and supervision;
- waiting time between appointments if the carer is required to be available.
Check pay against minimum wage over each pay reference period by dividing qualifying pay by all working hours, including travel. Paying a higher hourly rate for contact time only does not guarantee compliance.
Invoice visits by funder and check carer pay from the same rota data. Start your free trial.
Mileage
Carers using their own cars can be paid mileage allowance payments tax-free up to HMRC’s approved rate. Payments above the rate are taxable; paying less allows carers to claim relief themselves. Mileage is not pay for minimum wage purposes, so it cannot top up pay to the minimum.
Holiday pay and sleep-ins
Carers often work irregular hours. For leave years starting on or after 1 April 2024, irregular-hours workers accrue holiday at 12.07% of hours worked, and rolled-up holiday pay is allowed for them. Sleep-in shifts have their own minimum wage treatment; record them separately in payroll.
Cash flow
Council invoices are typically paid in 30 days, payroll weekly or fortnightly. Monitor aged debts by funder and resolve portal disputes quickly; small disputed amounts on hundreds of visits add up.
Month-end routine
- Export actual visits from the call-monitoring system and invoice each funder.
- Reconcile council remittances to invoices and log disputes.
- Run the minimum wage check for the pay period, including travel time.
- Review margin per round or area after pay, mileage and travel time.
For travel claims, see mileage allowance; for minimum wage rates, National Minimum Wage.
Keep funder invoices and round costs in one ledger. Start the free trial.