Tax Returns as a Christian Witness
At the end of the tax year, be sure to make yourself aware of income tax rules for those who are ‘ministers of religion’.
It’s March, in case you hadn’t noticed. Which means it’s nearly the end of the tax year (technically 5 April, but HMRC lets you work in whole months if you want, so that makes it the end of March).
As many people know, the tax system is very generous to charities. This allows (among other things) the reclamation of basic rate income tax paid on donations (‘Gift Aid’) allowing many churches to get £25 extra for every £100 donated, provided sufficient income or capital gains tax has been paid.
But many of those in full-time ministry (especially non-conformists) do not also know that there are income tax rules for them to follow if they are a ‘minister of religion’ or an employee acting as a ‘minister of religion.’
You may need to get professional advice on whether this status includes you or not. It’s an important question to find an answer to for three main reasons.
1. You Must Declare All Your Income
You may be paid by a church but receive other fees – for example a preaching fee from another church or a funeral fee from an undertaker. This includes the value of gifts received from preaching, including book tokens (although why do people give book tokens these days?).
My experience from talking to others in ministry is that they understate other income they receive. Perhaps this is not intentional, but they understate it nonetheless.
We have a Scriptural duty to declare our income (Romans 13) and to avoid doing so is legally wrong and biblically immoral.
2. You Can Make Claims Against Income
Tax rules about claiming expenses are reasonably complicated and you may need help.
Some of them depend on whether you own your own home or whether you are provided with it. For example, if you live in a manse, you can claim 25% of expenses you pay out to insure or repair it (though really the church should be paying for both of those things). If you work from your own home you can claim a proportion of the costs for energy.
You can also claim for books purchased – although (and not many people realise this) the claim must be limited to books for ‘divine service’ and books for sermon preparation unless you have a special dispensation from HMRC to do otherwise. On the whole, you can’t – for example – claim for Grudem on your shelf.
Another mistake some ministers make is to pay their wives as a deduction. You cannot do this unless you can show she is providing genuine secretarial assistance and is not carrying out work as a member of the church (in other words something that someone else in the church would do voluntarily in their capacity as a member).
Mileage can also be set off against income. Your church may pay you for zooming around in your Nissan Leaf, but the amount you can claim against income is set by HMRC. If your church pays you more, you cannot claim more. But if your church pays you less, you can still claim the full HMRC allowance and identify what the church reimburse you as an income. You will get tax relief on the balance. HMRC allow you to claim 45p per mile up to 10,000 miles and 20p per mile over that. The lower rate is 24p for motorbikes and (another surprise!) 20p per mile for pushbikes!
If you’re overwhelmed by all this stuff, then make use of a specialist. Organisations like Tax Management for Clergy and Peter Chalk and Co are used by many ministers to help them navigate the waters.
3. You Must Submit to Government
Properly engaging with the tax system may seem like a burden or a chore, but it is actually an important witness and good Christian citizenship. It is one of the many ways we demonstrate our allegiance to our Saviour who rules over all things and institutes those who rule over us (Romans 13).
Begrudging participants or reluctant tax-payers are ultimately rejecting the good God who bought them.
This article is for guidance only and does not constitute formal or financial advice, nor should you rely on it in completing your tax returns. We do not endorse any particular provider and names are only given as examples. Please ensure you check official guidance or seek professional advice where necessary.