What expenses can I pay a volunteer without creating a tax problem?

England and Wales: This page sets out the position in full. Scotland: the same position, with no difference in principle — the tax treatment of volunteer expenses is UK-wide and set by HMRC. Northern Ireland: the same position, with no difference in principle, for the same reason.

The volunteer expenses test is not a number

There is no sum a charity can pay a volunteer each week free of tax, although many charities believe there is. HMRC’s test for volunteer expenses looks at what the payment is for, not how big it is. The test is the same in England and Wales, Scotland and Northern Ireland. This step is for the treasurer, trustees or volunteer coordinator who set the policy.

It usually follows recruiting and inducting the volunteer, where expenses are first explained.

HMRC’s Employment Income Manual puts it this way, verbatim:

“If there is no office or employment, it follows that the reimbursement of any expenses incurred by voluntary workers in doing the work of the organisation will not give rise to liability to tax … If expenses are paid that do more than reimburse the costs incurred, or are at scale rates … that cannot reasonably be regarded as merely a reimbursement of what they spend, the voluntary workers may be receiving remuneration for their services.”

Volunteer expenses, in HMRC’s sense, are reimbursements of what a volunteer spent doing the charity’s work, not payments for their time. So a small payment that is not tied to real spending can be pay. A large one that is — a train fare to a distant event, say — is not.

Two ways a payment turns into wages

1. Round sums and flat rates. A fixed weekly or per-session amount, not tied to what this person spent, fails the test on its own terms. That is true however modest it is. The only safe version is a reimbursement of actual cost, or a genuine and reasonable estimate of what the individual incurred.
2. Payments that continue through sickness or holiday. A person who is off sick has no travel costs. If the payment keeps coming, it is not reimbursing anything. This is the clearest single marker of disguised wages.

The case usually cited for both is Migrant Advisory Service v Chaudri. A volunteer was paid a flat weekly sum called “travel and subsistence”, though she lived near the office and incurred no such costs. It continued through her holidays and sickness. The tribunal treated it as wages and found a contract of employment.

That case is known to this guide only through a law journal. The judgment itself was not read, so it is an illustration here, not authority. The principle does not depend on it — HMRC’s own wording above carries it.

The tax problem and the status problem are linked

A payment that is pay in disguise does two kinds of damage.

The first is tax. The volunteer may be receiving taxable remuneration.

The second is status. Paying more than genuine out-of-pocket expenses is one of the high-risk factors for turning a volunteer into a worker or an employee. Minimum wage, holiday pay and pensions then follow.

Deciding whether this is a volunteer role or a job covers that test. The same payment can cause both problems at once, which is why this page sits in the People hub rather than only in Money.

Mileage: take the rate from the table, not the example

Volunteers who drive on the charity’s business can be paid HMRC’s approved mileage rates — the same rates that apply to employees. At or below the approved rate there is no Income Tax. And for volunteer driving specifically, there is no National Insurance either, even if the rate more than covers the driver’s real costs. Above the approved rate, the driver may have made a taxable profit and may need to register for Self Assessment.

The rates for the current tax year are:

Two traps sit in HMRC’s own material.

The worked example is stale. The first-band car and van rate went up from the start of the 2026–27 tax year. HMRC’s rates table shows the new figure. But the worked example directly beneath it on the employer-facing guide still calculates at the old rate.

Anyone who skims to the example will copy the wrong number into their policy. Take the rate from the table.

Only one rate moved. The first-band car and van rate changed. The rate above that band did not. Nor did motorcycles, bicycles or the passenger payment. A policy that uplifts every rate by the same proportion will be wrong on all of them.

Thank-you gifts and honoraria

A regular “honorarium” looks like pay, while a genuine one-off thank-you gift is unlikely to be taxable. That is inferred from HMRC’s principles on office holders, not stated by HMRC: HMRC does not use the word “honorarium” on the pages this guide read.

A regular honorarium also carries the same status risk as a flat-rate allowance. If you want to thank a volunteer, a one-off gesture is safer than a recurring one.

Charity trustees are a separate case. ITEPA 2003 s.299B has put reimbursed reasonable expenses of voluntary office holders on a statutory footing since 6 April 2020. That includes charity trustees who receive no pay for the office. This guide has that from HMRC’s own manual (EIM71120), not from the section itself.

Write the policy and the claim form

The deliverable is short. A policy that says what the charity reimburses, on what evidence, and at what mileage rate. And a claim form that will not accept a claim without a receipt, ticket or mileage log.

Build in the markers from this page:

• actual, evidenced cost only — no round sums or daily allowances
• nothing paid for a period when the volunteer was not volunteering
• mileage at the approved rate, taken from HMRC’s table and reviewed each tax year
• no payment described as a reward, thank-you or allowance

The Money hub’s page on trustee and volunteer expenses covers the same rules from the accounting side. It deals with coding, disclosure and the difference between expenses and paying a trustee. The two pages say the same thing. A template is planned: Expenses policy (planned).

With the expenses policy written, the next step is to insure and risk-assess your volunteers.

Common mistake: paying a round sum or flat rate instead of actual cost

A flat rate is easier to administer and feels generous. On HMRC’s own wording, payments that “do more than reimburse the costs incurred, or are at scale rates” may be remuneration. A flat rate fails the test on its own terms.

Common mistake: continuing “expenses” through sickness or holiday

Nobody wants to stop a small regular payment when someone is ill. It is the clearest single marker of disguised wages, and a fact relied on in Chaudri. That case is an illustration only: this guide has not read the judgment, and the principle comes from HMRC.

Common mistake: copying the mileage rate from HMRC’s worked example

The example sits directly beneath the rates table and is what people skim to. It still calculates at the superseded rate. Copy it and the policy is wrong for every volunteer driver.

Common mistake: uplifting every mileage rate by the same proportion

A policy that lists several rates gets updated in one edit. Only the first-band car and van rate moved. A proportional uplift is wrong for every other rate.

Worked example

Wrenfield Village Hall has a volunteer who drives older residents to its lunch club in her own car. The treasurer proposes paying her a fixed weekly sum to cover it.

A fixed weekly sum fails the actual-cost test whatever its size. It also becomes a problem if she is away for a fortnight and the payment carries on.

Instead, the hall pays mileage at the approved rate against a log of her actual journeys. It takes the rate from HMRC’s table rather than its example. At or below that rate there is no Income Tax, and because this is volunteer driving, no National Insurance. And because the payment tracks real journeys, it adds no status risk factor.