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Tax Treatment of Honorarium Payments

Tax Treatment of Honorarium Payments
Honoraria are one-off payments of an unexpected amount made to volunteers who perfrom a role or service.

Janet & Barry currently receive an untaxed amount of £50.00 per month between them, which is paind into a joint bank account. This amount does not include miscellaneous expenses or statutory disocesan fees, all of which are also paid into the same account.

At present, nobody else receives honorarium payments.

Due to the nature and regularity of these payments, we believe that this should not be categorized as an honorarium, but actually a taxable income stream; they are paid workers acting for the PCC. This means that either Janet and/or Barry should be declaring the total sum of all untaxed income to HMRC via self-assessment (reimbursed expenses do not count, but this would include both the total "honorarium" and fees received), or that the verger should be included as an employee via the church's PAYE scheme and all income be taxed at source.

Unfortunately, this means that there should be contracts of employment in place, and the employer should be bound by employment and minimum wage legislation. As of April 2020, the national living wage for employees over the age of 25 is £8.72 per hour. While the statutory "fees" are payable as per diocesan guidelines, all other work that the “honorarium” is payable in lieu of should be accounted for by timesheets and paid accordingly.
 
This is the case for all payments made to date and if earlier payments made have not been declared via self-assessment, the employer should gross up and foot the bill for all backdated payments made that have to date, not been subject to tax. This is because it is the responsibility of the employer to ensure that a business/entity is compliant with appropriate rules and legislation.
 
If you have proof that an employee has reached state pension age, you’ll stop deducting National Insurance from their pay, but you will still need to pay employer’s contributions for them.
An employee over state pension age will only pay Income Tax if theirtotal taxable income - including their private pension and State Pension - is more than their tax-free allowances (the amount of income you’re allowed before you pay tax).
 
Regarding the workplace pension – this is unlikely to affect the payments described above as employees are only automatically enrolled into the workplace pension scheme if they meet both of the following criteria:
  • Are aged between 22 and state pension age
  • Earn more than £833.00 per month
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