A third of homeowners admitted to paying workmen in cash to avoid VAT

The habit of paying cash in hand is costing the taxman more than £5 billion a year, enough to fund a 1p cut in the basic-rate of income tax or employ an extra 20,000 policemen.

A third of homeowners, equivalent to about 5.5 million households, admit to paying workmen in cash to avoid VAT, a study has found.

With an estimated four million households renovating their homes each year at an average cost of £19,300, that suggests at least £5.1 billion is failing to make its way to HM Revenue and Customs. The real amount could be higher, with many people unwilling to admit to using the black economy.

The findings, in a YouGov survey for the Homeowners Alliance, has led to calls for a