Newbie Clergy Tax Tips

Me when trying to work out anything to do with figures…

So if you’re about to be ordained or were earlier this year, you need to know that you must submit a tax return. Perhaps I was asleep at that point at Vicar School but I don’t remember anyone telling me this. It was only having heard other people talk about tax breaks and the like that I realised. Now of course you should receive a letter from HMRC telling you about this anyway just in case you do sleep through that gem of information, but mine went amiss, or perhaps was filed in amongst the shed load of post-ordination paper work, who knows. Anyway it was finally in the Autumn this year I got around to sorting it out, and by then I’d missed the online filing deadline. We turned to a clergy tax company who sorted it all out for us and I am so glad I did, even with a simple return it’s rather complicated! I’ve learned a few things along the way that I wish I’d known at the start so here’s a few tips gathered from my own experience and that of other clergy.

1) If you’re not experienced in tax returns, most people advise using a clergy specialist agent at least for the first year. My return is very simple but even just taking into account that we own our own house which we don’t live in, and all that had to be declared, and all the costs that go with it, made it more complicated than I thought. I used Tax Management for Clergy (TMC) and it cost me £114 and my husband’s return using the same info will be £40 (Others suggested Mintaplan or Taxcalc). Well worth the cost, spending over an hour on the phone and masses of emails confirming information and what I needed to include and could exclude. Next year will be much easier!

NB: If you are going to file your own return online you do need specialist tax software, which is – as is a clergy accountant – offsetable against tax.

2) HLC – Heating/Lighting/Cleaning grant – not technically tax but needs to be declared if you get it. I understand it’s only given to stipendiary clergy in clergy accommodation, and it means you don’t pay tax on what you pay for HLC (so you get back about 16% which comes in your pay packet each month). In the first year of Curacy you guesstimate it – it’s one of the gazillion forms you get sent to fill in at the start. Try not to miss this, it is easy in amongst all the paperwork but does give you more money in the long run. After the first year, you need to put in actual costs rather than an estimate. I had no idea where to start with this – I mean how do you work out how much electricity goes on lighting? Well here’s the thing, you don’t. I gave TMC the figures for all our costs and they worked out the percentage which went on the tax return, but also I could then submit that to CofE (albeit I was late so 2 months of less in my pay packet until they catch up – tip: don’t be late!). And make sure you register with MyView as you need to add the figures online but this is also where you can find all your pay info etc.

3) On not being a spy. When I first called HMRC about my tax number they told me my files were ‘access denied’ and so they couldn’t look at them, nor could they tell me anything about why this was the case. I had to go via a special department and wait for them to call me back – all very mysterious except that I now know it’s called Public Department 1 – not very mysterious sounding after all. At the time it was rather frustrating, and at first I was told they put special agents in that category – cue comedy gags. Anyway it turns out basically all clergy get put in that dept so nothing to worry about but you need to call a different number if you are calling HMRC (03000 534720) and that makes it all a whole lot easier.

4) Tax Credits. If you get them, make sure they are totted up correctly and most efficiently. A few things on this:

  • Some clergy accountants recommend paying a spouse to do things like cleaning/ secretarial work, however if you get tax credits it is not worth it financially. Although it might be more efficient or make sense to you, you will actually lose more than you save, in tax credits. Apparently not all accountants get this so it’s worth checking.
  • Make sure you declare your charitable giving to the tax credits people too (i.e. anything that can be gift aided) as this brings your taxable income down, but in addition puts the tax credits you receive up. So for example for every £1 you give, you get around 50p back. The same works if you use ‘Give as You Earn’ – which is actually a bit better as it means you also pay less tax. #bonus
  • It’s also worth remembering that however you bring your taxable income down, this means your tax credits go up and puts more money back in your pocket in the long run. So for example if you employ secretarial help, the amount you pay is taken off your taxable income (and puts your tax credits up) and effectively makes your secretarial costs relatively cheap.
  • Again another phone number, but tax credits dept is: 0345 302 1493 and they are apparently very friendly.

5) Here follows a list of things I didn’t know you could include against tax, so do keep a record/keep receipts from the start (I didn’t…). All of these are claimable so long as the costs are not covered elsewhere, e.g. by the parish/first post grant etc

  • Cost of entertaining at home – e.g. meetings, meals, anything that could be construed as part of ministry that you haven’t claimed for from your parish. This year I’ve had to guess but even a list of 3 x coffee mornings, 4 x meetings with biscuits 1 x staff meal etc is helpful. Better is a list of how many people, what for and when.
  • Cost of cleaning and replacing robes (not including any you bought with the first post grant if you got one). Strangely this does not include clergy shirts, shame.
  • Household contents insurance in clergy housing.
  • Cost of replacing study equipment, not covered by parish. eg: I bought a laminator and a filing cabinet this year (which I was way too excited about), but any office equipment, can be included as well as computer software that is used for work purposes.
  • Theological books – seems to be no limit on this which is great for those of us who love to stuff our shelves or kindles with reading material.
  • Cost of minor repairs to the Vicarage (again if not covered elsewhere or by your housing dept)
  • Gardening costs* – not plants but again minor repairs not already covered, e.g. grass seed, replacing a washing line etc (things you might think you can’t face the effort of contacting the diocesan housing department for…)
  • Equipment* that relates to any of the above, e.g. we have a new vacuum cleaner as the old one packed up – that’s included as it’s a church property, which you have to keep clean (technically speaking!)
  • * is because it has been suggested that you’d be better off putting these under your HLC claim for a better percentage, though I think mine went under separate expenses. Better ask your accountant :)

6) So all that boils down to, keep all your receipts through the year as you never know what you might be able to include, tax is rarely black and white and even less so if you’re clergy. As was pointed out in a Twitter conversation on this: ‘Honesty is important, but if something is genuinely work, by all means claim for it’. 

Parishes work in different ways but here we claim expenses monthly and so a good idea is to keep an excel sheet on the go (or use something like expensify) and at the same time as doing the monthly parish stuff, add in anything wider to the main sheet. If you want to be really organised put it into categories as you go.


I hope this is a useful list, feel free to ask questions but I’ve got to be honest I’m not all that great with this stuff, hence why I use TMC!

And finally, big thanks to other clergy who have contributed to this list, there have been a few but particularly to Tiffer Robinson.

 

2 thoughts on “Newbie Clergy Tax Tips

  1. ukviewer says:

    Some interesting points about claimable items. So, how does this apply to LLM. for Instance.

    Gift Aiding – if we tell HMRC what we are gift aiding, can we get deductions?

    Cleaning Robes – the same?

    Books – the same? I spent hundreds and still do on books for training, not available from the diocesan system.

    As we are voluntary, not stipendiary does any of this even matter. I can, if I wish, claim expenses from the PCC, but think of my expenses as a donation to the parish – can these be gift aided?

    Interestingly, my tax branch is PD5, which deals with all serving and retired Armed Forces personnel.

    My issue is that being a pensioner I am on a fixed income which is declared directly by the pension providers to HMRC, so no hiding place. I also have income from investments and savings, and am able to claim deductions for ongoing membership of professional associations, which I keep up, just in case I ever need the professional knowledge and CPD that they provide, even too the oldies like me.

    The status of LLM as licensed lay ministers is not something that appears in tax advice to individuals – as we are not paid, it doesn’t appear to matter.

    I suppose I need to seek tax advice, but begrudge paying more for a service than I will probably save.

    • Tiffer Robinson says:

      Ukviewer: as an LLM what you say is correct, most of this doesn’t apply to you, because the tax status of Ministers of religion relates only to income received in that capacity, not income from property or pensions or other employment. However you are perfectly entitled to expenses from your parishes as you say.

      You can choose not to claim expenses and consider that part of your giving to the parish(es), however this is not able to be gift aided: for that you would have to claim the expenses, and then make a donation of the same amount back and gift aid it. This would be entirely voluntary, and people cannot be given expenses on the condition that they are then given back as a gift aided donation.

      The only advantage to informing HMRC of gift aid donations is where you are a higher rate taxpayer or on tax credits (I am not sure about universal credit). If you are a higher rate taxpayer then the level at which you pay higher rate tax increases. For some people with large assets and investment income, this can sometimes mean that giving away money tax efficiently will actually save them more money in the lower rate of tax they will pay on that other income.

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