Assistance for Chapels / Documents / 9. Employment of Pastor

Employment of Pastor

These notes are to the best of our knowledge as at September 2026 but if in any doubt consult a practicing accountant.

Employee or Office Holder?

In appointing a pastor, a crucial decision to be taken at the outset is whether they are to be considered as an employee or an office holder. Requirements and responsibilities vary depending on which you choose. Treating your Pastor as an employee is much better defined and clear to operate, but confers rights that he may not wish to have and will be onerous for the church to implement. He will require a Contract of Employment. In particular employees are covered by National Minimum Wage requirements. Treating your Pastor as an Office Holder removes many of his employment rights, but effort is required to secure that status, so that it is not over-ridden by a court in any dispute. Most churches and pastors will be content to take the advantages of treating the pastor as an Office Holder and accept the associated risks.

More advice and case studies can be found here:
https://www.edwardconnor.com/2025/05/15/is-your-pastor-an-employee-office-holder-or-both/

This is a decision each church and pastor have to make for themselves; either way the church has two responsibilities:
  1. To operate PAYE and account to HMRC for the tax and national insurance deducted
  2. To hold employer liability insurance. This is included in the ANSVAR policies that many churches have.
If you opt to treat your Pastor as an employee you will also need to:
  1. To enrol the Pastor into a pension scheme (which he can accept or decline after registration) if he will be earning over £10,000 per annum.


Please note that the whole process is most straight forward when these actions are taken 1-2 months before the Pastor takes up his position and receives his first payment.

 

Commencing Employment - Overview

A full overview of the process for commencing employment for the first time can be found here: https://www.gov.uk/get-ready-to-employ-someone. Not all aspects will be required for an Office Holder.

Two steps need to be carried out before PAYE registration can take place:

  1. The church needs to open a HMRC account: This may be already in place for Gift Aid or other purposes. If not, this is done using the gov.uk website and will give the church a Government Gateway number and unique taxpayer reference (UTR). https://www.gov.uk/log-in-register-hmrc-online-services
 
  1. The church needs to register as an employer for PAYE: https://www.gov.uk/register-employer is a good starting point. After a few questions you will need to classify the church as a “Charity or committee-run organisation”. This means that the initial application needs to be made by post or over the telephone:
  2. Postal:  write to National Insurance Contributions & Employers Office, HM Revenue & Customs, BX9 1BX.
  3. Phone:  0300 200 3200

When you phone or write, you’ll need to provide information about your company, including:

  • its name, business address and phone number
  • the type of business - church
  • the charity number (if applicable)
You’ll also need to provide:
 
  • treasurer’s name, email address and a telephone number HMRC can contact you on
  • a postal address for correspondence
Finally, you’ll need to provide the following information about your Pastor:
  • the date of their first payday
  • how many people you’re employing – i.e. one
  • whether you’ll be operating an occupational pension scheme. ‘Yes’ if an employee, ‘no’ if an office holder.
HMRC will generate and post the physical Employer PAYE Reference and Accounts Office Reference numbers (typically within 10 to 15 working days).

Once HMRC has manually created the scheme and issued the reference numbers, you can then work online using a Government Gateway Account, log into HMRC Online Services, and manually enrol the organisation in the "PAYE for Employers" service using the provided references. This allows you to view filings, handle tax codes, and submit mandatory Real-Time Information (RTI) digital reports using payroll software.
 

Note: You may incur a fine if registration is not made within 28 days of the first payment being made to the Pastor.

 

 Final Steps

  • You will need to have enrolled for PAYE online before you can send payroll information to HMRC.  A recommended system to download is:  HMRC “Basic PAYE Tools” which is a free payroll software from HMRC for businesses with fewer than 10 employees. https://www.gov.uk/basic-paye-tools.  (Scroll down the first page and select whichever version you require)
  • Set up a direct debit for HMRC to automatically take tax and National Insurance amounts owing.  This can be done via the HMRC website – log into your account and follow the steps under “PAYE for employers”
  • Collect and keep employee records, including their tax codes and starter declarations. 

National Insurance Contributions

National Insurance payments need to be made for Employees and Office Holders.
  • Employer contributions – The church will be entitled to “Employment Allowance” which can be claimed via the PAYE tool and covers the pastor’s pay up to £75,000, providing he is the sole employee. This wipes out the employer contribution.
  • Employee contributions – These deductions are made via the PAYE and it will be a choice for the church whether to deduct these payments from the Pastor’s pay.

Pension Scheme for employees

When the first payment is made to the pastor via PAYE, HMRC will alert The Pensions Regulator (TPR) and they will send an automatic enrolment letter because they will assume the pastor is an employee. If the pastor is an office holder, when receiving this letter, you should tell TPR that the church is "not an employer". There is an online form for this, but the "office bearer" situation is not one of the standard options, so the church should call them instead to tell them. TPR should then mark your organisation as having no employees. This is only true if the church has no other employees or workers and if the pastor is appointed as an office bearer.

If the decision is to make the Pastor an employee then you will be required to enrol the new Pastor into a pension scheme, even if the Pastor doesn’t wish to join. Your Pastor will receive an option to opt out: this is his responsibility and needs to be reconfirmed every three years.

Unless you are already familiar with using a pension provider, we recommend enrolling using NEST. https://www.nestpensions.org.uk/schemeweb/nest/employers.html Their enrolment process is geared for small employers, incurs no fees and has a simple opt out process.
 

Note: The form filling is mostly intuitive if enrolment is done before the Pastor takes up his position and payments commence.  

 

Routine Activity

  • Report the Pastor’s gross taxable income to HMRC on or before each payday.  
  • Pay HMRC tax deducted from the Pastor’s pay (don’t be alarmed by tax arrears warnings. The tax church owes will automatically be collected at the time stated). This can be done manually using a debit card or automatically using direct debit.

End of Tax Year Actions

At the end of each tax year you will need to transfer from last tax year to new current year. On your payroll inputting site select “migrate employee to new tax year” and say “yes” to being eligible to claim employment allowance.
You will need to print a P60 off for the pastor to keep (advisable to also keep a copy in your records). This can be done using your payroll inputting site (HMRC basic Employment Reporting) under your church’s menu (P60 forms).
 

Benefits and Expenses

Some benefits will be taxable and others non-taxable or tax deductible. Taxable benefits need to be declared either with PAYE or each year to HMRC on a P11D form and a copy given to your pastor. This form summarises how much tax has been paid by the church treasurer for what benefits.
Your pastor will need the P11D information when filling in his tax return. It is advisable for church and pastor to consult an accountant, at least initially. to be certain what benefits can be claimed against tax. Mileage and subsistence allowances at a standard rate aren’t taxable and don’t need to be declared, and this will be all that concerns many churches.
 

Note: There is a deadline of 6th July for submitting a P11D form


As a minister your pastor should be familiar already with the tax deductible benefits he can claim.
 

Relocation expenses

Where a pastor moves house to take up a pastorate, the church should prayerfully consider how the costs of relocation are to be covered. At the time of writing, the average cost of moving home is around £13k, with the largest cost usually being stamp duty, which is calculated based on the value of the properties involved. Currently, the church is able to reimburse up to £8k of these costs without creating a tax liability for the pastor. If the church reimburses costs over £8k, the pastor will pay tax on the excess, which could be considerable. 

For example, if relocation costs total £10k and the church wishes to cover the total, and the pastor is in the 20% tax bracket, the total cost to the church will be £10,500. £500 of this (20% of £2k) will be taken in tax. 

If the relocation costs £20k and the church wishes to cover the total, and the pastor is in the 40% tax bracket, the total cost to the church will be £28k. £8k of this (40% of £12k) will be taken in tax.