Expenses and honoraria

As an unpaid volunteer, you do not usually count as an employee, so there is no question of pay, tax or National Insurance (NI). You can claim back expenses, undergo training that enables you to do the work and receive meals and accommodation if they are reasonable, given the role you have taken on.

Reimbursed expenses are tax-free, provided they are not excessive in comparison to the actual amounts you incur. You can claim for items such as travel to and from the place where you volunteer, travel while you are doing your voluntary work, postage and phone calls, the cost of childcare or care for an older dependent to enable you to take on the voluntary work, and the cost of necessary protective clothing and equipment. If you use your own vehicle, you can receive a tax-free mileage allowance up to the rates shown in Table 1.

*25p a mile for each mile over 10,000 in a ax year. 

Table 1. Tax-free mileage allowance if you use your own vehicle.

If you receive excessive expenses - for example, a flat rate that is consistently higher than the amounts you spend - or mileage allowance above the rates in the table, this would normally be treated by HM Revenue & Customs (HMRC) as earnings. In that case, the organisation paying you would be required to operate PAYE to deduct income tax and NI contributions if the pay was high enough and some of the expenses (such as travel to and from the workplace) would no longer be tax-free. As evidence of your actual expenses, get receipts and keep a mileage log if you are using your own car.

An honorarium is strictly speaking an unexpected, one-off payment made as an expression of thanks. Where an honorarium is paid regularly or expected, then it will usually count as earnings and be taxable.

If you are claiming means-tested State benefits, such as pension credit, the amount you get should not be affected by volunteering, if the only money you receive is your out-of-pocket expenses and mileage allowance as shown in the table above.

Tax and clubs

Many local clubs and societies assume that their activities are outside the tax system, but this is not the case. Small clubs are potentially liable for corporation tax on any profits they make - even if the profits are ploughed back into the society, donated to charity or used for good causes. In practice, HMRC will not seek any tax, provided the annual tax liability is no more than £100, and the club is run exclusively for its members.

Some income your club receives will not count towards your taxable profits, for example: 

• Income from most small-scale fundraising events where the proceeds are for charity, to promote participation in sport or cultural events;
• Membership subscriptions;
• The sale of donated goods;
• Cash donations.

Tax and charities

Different rules apply if your society is a charity. In most cases, it will qualify for exemption from any income and corporation tax and can receive bank and building society interest without any tax deducted. It can also receive donations through the Gift Aid scheme and claim back tax on them (see below).

Some bodies, like Scout groups, and small societies with income of less than £1,000 a year and no land do not need to register with the Charities Commission (or Scottish Charity Regulator), but can still be recognised as charitable for tax purposes by applying to HMRC Charities. To qualify as a charity, your society will need to satisfy HMRC that it is a non-profit-distributing body whose aim is to: advance education; advance religion; relieve poverty, sickness or infirmity; or carry out other activities beneficial to the community. Sports groups registered with HMRC as Community Amateur Sports Clubs are treated for tax in the same way as charities.

For more information, see the HMRC website at www.hmrc.gov.uk/charities