The following Employment Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
Most ministers of religion or members of the clergy are either office-holders or employees and so their earnings are taxable under ITEPA 2003 as employment income and are subject to Class 1 National Insurance.
For the purposes of the tax system, a minister does not have to belong to any particular religion or denomination, so could equally well be a Church of England vicar, a Roman Catholic priest, a rabbi or an imam. But a monk or nun does not count as a minister of religion for tax purposes, nor do ordinary lay people employed by a church or other religious organisations.
Where tax law or HMRC guidance talks about a ‘church’ in this context, it means any building specifically used as a place of worship, including a synagogue, mosque or temple.
The tax and National Insurance rules set out below only apply to ministers of religion who are currently working as such. If a minister of religion takes up a different type of job, for example as a teacher or church administrator, then he is subject to the normal tax rules.
Although the employment income of a minister of religion is subject to PAYE in the normal way, there is a slight difference in the routine procedures if the minister is also within self assessment. There is a special supplementary page to the self assessment return, SA102M, which ministers of religion have to complete instead of an ordinary employment supplementary page. As with other pages of the tax return, HMRC issues a guidance note to help filling in the SA102M.
A minister may also receive fees for work he undertakes outside the area to which he is formally assigned. For example, he may receive fees for preaching in a church in another town, or for lecturing at a religious conference. Such fees are misce
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