If you volunteer – for example, for a charity, or to get some work experience or you take part in a clinical trial or research study, you may receive payments. We explain how these payments are treated for income tax and National Insurance (NIC) purposes.
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Payments you might receive
Payments for volunteering can include a cash payment, a reward, gift or a benefit in kind, such as a voucher.
Often, you will receive a payment to cover any costs you have incurred in carrying out the voluntary work. However, sometimes, the payment will be to recognise the time you have spent or will be more than the actual costs you have incurred. This may apply if you are paid for your time as part of co-production, involvement, or service user participation for example.
The different kinds of payments may result in different income tax and NIC treatment.
Paid or reimbursed expenses
Generally, if the charity or other organisation for which you volunteer pays or reimburses you only for actual expenses that you have incurred (or makes a reasonable estimate of such expenses), you will not have to pay any income tax or NIC on the payments.
This applies to expenses that you incur in carrying out the volunteer work. It also applies to expenses that you incur to put you in a position to carry out the voluntary work in the first place.
Examples of expenses that you might incur include:
- food and drink you consume while volunteering
- care of dependents while volunteering
- travel undertaken in the course of volunteering
- travel to and from the place of volunteering
- equipment or protective clothing if needed for carrying out the voluntary work
- sundries like phone calls or postage
You may have to complete an expenses claim form and it is a good idea to obtain and keep receipts. You may need to provide these to the charity when claiming for payment or reimbursement of expenses.
Because it is very difficult to estimate the actual cost of using your own vehicle, there are instead statutory rates of mileage reimbursement that can be paid for traveling in relation to your volunteering and/or carrying passengers. Provided there is no profit element (that is, no excess is paid), they are not subject to tax or NIC.
You will need to keep records to show that the mileage expenses claimed are reasonable. For example, you might keep a diary of the dates you volunteered at the charity and distances travelled, in order to substantiate your claim for mileage costs.
Note that these are the maximum rates that can be paid without incurring a tax liability: you may be paid less.
|First 10,000 business miles in the tax year
|Each business mile over 10,000 in the tax year
|Cars and vans
The mileage rate covers the costs of running and maintaining the vehicle, such as fuel, oil, servicing, repairs, insurance, vehicle excise duty and MOT. The rate also covers depreciation of the vehicle.
Taxable volunteer payments
- Receiving payments greater than actual expenses
If you received payments that exceed the costs you have actually incurred, HMRC may view you as having received reward for your work or services. For example, if the charity gives you a round sum allowance of £10 for travel expenses, but you actually walk. HMRC have guidance about this in their employment income manual.
Another example might be where the organisation reimburses you for mileage at a rate higher than the HMRC approved rates above. Where you receive payments that are more than your actual expenses, the payment will be taxable. However, see the example below.
John is a volunteer driver for the NHS. He is reimbursed 50p a mile. The standard mileage rate is 45p per mile, plus an additional 5p per passenger carried. As John is reimbursed 50p per mile, then determining whether he has received in excess of the approved mileage rates, will depend on the type of journey:
For miles where he is carrying a passenger, then there will be no profit element – John is entitled to 50p as a tax free mileage repayment, being 45p plus 5p passenger element
If John sometimes carries more than one passenger while volunteering, then he will have received less than the maximum reimbursement. For example, if driving a patient and their partner home from the hospital, then for tax purposes, John could be reimbursed 55p (45p + 5p +5p) per mile for that journey.
If John is also reimbursed for miles where he is alone in the car – for example, the journey back to the hospital/home after dropping off a patient then he will be making a profit per mile.
It could therefore be the case that some journeys are over-reimbursed and some journeys are under-reimbursed and the two may largely off-set each other.
- Receiving an ‘honorarium’ or other token payment
If you provide professional services to an organisation for no fee, then sometimes that organisation might wish to pay you a token amount for your services. Usually this will be an amount below the commercial rate for the work you have undertaken. Such payments will always be taxable.
Many clubs, societies, charities and voluntary organisations depend on unpaid individuals filling roles such as chairman, treasurer and secretary. Such positions usually have a continued existence over time and in most cases, will be seen as ‘offices’ for the purposes of tax law. If you are an office holder then any honorarium made to you as a thank you for fulfilling that position, even though the amounts may be very small, should strictly be subject to tax and NIC as employment income. See below and HMRC’s guidance for further information.
If you receive any other type of payment, reward or benefit in kind for your work or services – such as payment for your time to attend a meeting, or a payment to compensate you for time sacrificed to take part in a clinical trial, for example, these may be taxable but not necessarily as employment income. See below.
- Receiving a thank you gift
The charity or organisation for which you volunteer may make a small gift to you as a ‘thank you’. Provided the gift is a genuine gift, and not expected or a reward for work or services, the gift will not usually be taxable.
However, if the gift is expected or is actually a reward for work or services, then, as with excess expense payments and other token payments, the gift will be taxable. In this case, the charity would have to tell you the amount that is taxable.
How tax is collected on taxable payments
If you receive a taxable payment for volunteering services, then you will need to understand how income tax (and possibly NIC) are collected on these payments.
The income tax and NIC treatment depends on your ‘employment status’, in terms of your relationship with the organisation making the payment.
The payments will be treated as employment income if:
- You hold an office or employment (as explained here) with the organisation, and
- You have earnings from that office or employment
If this is the case, the organisation will become your employer, and must operate Pay As You Earn (PAYE) on certain payments. For information on what this means, practically speaking, see our page Payments to volunteers. To the extent that PAYE is operated on your payments and the PAYE is excessive because of the availability of the personal allowance for example, you can get a tax refund.
If payments from the organisation are treated as employment income for tax purposes, it may also need to give you various rights and protections under employment law. You might also be entitled to the national minimum wage, which we discuss below.
You should be aware that if your payments are treated as employment income, then certain expenses that you are paid or reimbursed, will almost always be taxable (for example, home to work expenses). This is because the rules for allowable expenses for employment income are much stricter than if you are just a volunteer.
There are occasions where, although you are technically in receipt of employment income, there are no tax implications for you, for example, where you receive a trivial benefit.
If you are not an employee or office holder but receive excess expenses or reward for your work or services, you will receive the payments gross from the organisation. This may apply, if you are taking part in a clinical trial for example, where HMRC accept that any payment is unlikely to be employment income.
However, you will have to report the expenses payments to HMRC. You will likely report this as miscellaneous income. You may have to pay income tax on this depending on the level of your other income, but you will not have to pay NIC on it.
There is a £1,000 a year trading allowance for tax purposes which means that, if you are not trading or otherwise using it, small amounts of miscellaneous income like volunteer expense payments should not be taxable or reportable. If payments exceed £1,000 a year then the trading allowance can still be beneficial to you as you can use it as a deduction if you do not have many expenses.
The trading allowance does not apply to employment income so you should probably not use it against an honorarium for example. Note, also that the trading allowance does not apply when determining 'income' for certain welfare benefits purposes – see more information below on the impact of volunteering on state benefits entitlement.
What this £1,000 allowance means is:
- If your miscellaneous income for a tax year is less than £1,000, you do not have to pay income tax on it and you do not have to report it to HMRC.
- If your miscellaneous income is more than £1,000 but less than £2,500, you will have to tell HMRC about it. However, depending on your other income, you may not have to complete a self assessment tax return as HMRC may be able to collect any tax due, through PAYE.
- If your miscellaneous income is more than £2,500, you will probably have to complete a self assessment tax return to report the income to HMRC if there is tax to pay (even if it can be collected through PAYE). If there is no tax to pay but the income is more than £2,500, you should still tell HMRC about the income.
If you are volunteering for a registered charity, you may decide that you do not wish to receive reimbursement of your expenses from the charity, or you may wish to donate the reimbursed expenses back to the charity.
Provided you are a UK taxpayer, then you can do this in a tax efficient manner, as follows:
- Receive reimbursement of the expenses in question
- Gift the payment of expenses back to the charity as a gift aid donation
If you waive the expenses payment, neither you nor the charity can claim gift aid tax relief, as for gift aid to apply, there must be an actual payment donated to the charity.
If you decide to donate your reimbursed expenses back to the charity under gift aid, it is important to note that you must have paid enough tax in the tax year to cover the tax relief. If you have not, HMRC may charge you for the tax relief that the charity claims.
Expenses that are not reimbursed
There is no tax relief available to volunteers who incur expenses that are not reimbursed.
Even if you have other income, such as employment income or self-employed profits, you cannot claim a deduction against that for expenses incurred as a volunteer. For deductions to be claimed on a form P87 against employment income, for example, the expense has to be incurred wholly, exclusively and necessarily in the performance of your duties in that employment, not for any other purpose.
If you buy things yourself and the expense includes VAT, it is not possible claim VAT relief.
However, with respect to this point and the one on tax relief, we understand it is considered good practice for charities to reimburse volunteer expenses, especially where there are no tax and NIC implications for the charity, if they reimburse expenses. If the charity you volunteer for is made aware of the extent of your costs, perhaps it may consider supporting you at least in part in relation to your expenses, which might help a bit towards your overall costs of volunteering and recognise your contribution.
National minimum wage
If you only receive reimbursement of actual expenses incurred, then you are specifically exempt from entitlement to the national minimum wage (NMW).
If the payments you receive exceed the expenses you have actually incurred, and if you are a ‘worker’, then you may be entitled to the NMW. A ‘worker’ is a person who does work for someone else under a contract (written, oral or implied).
Put another way, if there is no contractual relationship between the volunteer and the charity, then there is no entitlement to the NMW. If there is a contractual relationship with the charity (such that the volunteer becomes a ‘worker’) then there may be an entitlement to the NMW if the person receives monetary payments other than expenses.
You can read more about when volunteers may be ‘workers’ and due the NMW in the HMRC technical manual.
You will probably want to ensure that any voluntary work you carry out does not end up restricting any benefits that would otherwise be paid to you, or at least understand the potential consequences.
In general, volunteering will not affect your entitlement to welfare benefits as long as you only receive reimbursement for actual expenses incurred.
However, if you receive a payment that is taxable (either as employment income or miscellaneous income, as described above), benefits or tax credits could be affected – each individual case will be different.
For example, under universal credit (UC), payments would be treated as unearned income if they fall to be taxable as miscellaneous income (regardless of whether any tax is paid – for example because of the use of trading allowance). If payments fall to be treated as employment income, and are processed through the payroll, then they should be notified to HMRC as part of this. In turn, HMRC should notify the Department for Work and Pensions in respect of your UC – meaning that they will have visibility over the payments. Sometimes, you might receive remuneration in the form of a non-cash voucher. Due to a quirk in the legislation, non-cash vouchers are not currently counted as earned income for UC.
If you are in any doubt, you should speak to a welfare rights adviser or HMRC to find out what effect the volunteering will have on your benefit entitlements.
More help and information
There is a guide available from the National Institute for Health and Care Research for volunteer members of the public offering answers to some frequently asked questions, in particular covering the implications of receiving payments if you are on state benefits or receiving a retirement pension.
If you need help with issues related to the NMW or employment law, you could contact the Advisory, Conciliation and Arbitration Service (ACAS).
We have information about payments made to volunteers from the perspective of organisations. Volunteers may find this useful as it covers additional scenarios such as where volunteers are allowed to use charity assets.