HLC Scheme

The HLC Scheme is run in partnership with HM Revenue and Customs and is unique to the Church Commissioners’ clergy payroll.

It allows you to claim tax relief on the heating, lighting, cleaning and garden upkeep (HLC) costs of your official property. It’s a reclassification of part of the stipend which is paid before tax and National Insurance are deducted, it isn’t an additional payment.

It's viewed as a taxable service benefit because you can claim for your costs for the whole property, not just the work related portion.

Terms and Conditions
To qualify for the scheme, you need to:

  • Be a full-time office holder paid through the Church Commissioners' clergy payroll
  • Occupy, rent-free, an official house provided by the Church of England (or a charity)
  • Confirm an Annual Return each year

You can only claim for your HLC costs in those parts of the property which are used for official purposes and/or occupied by you or your family.

Licensed Lay workers
What if I am not eligible?

How does it work?

When you join the scheme, we will ask for an initial estimate of your annual HLC costs. This figure will be used to calculate your provisional monthly tax-free allowance. It will show on your statement as a negative amount as it reduces the amount of your pay that is subject to tax and National Insurance. It is important to make this estimate as realistic as possible as it affects how much tax and NI you pay, you can contact us to amend your estimate if your costs are higher/lower than you expected.

At the end of each tax year we will ask you to submit an Annual Return, which is when you tell us what you actually spent.  We will adjust your allowance based on the information you provide, your pay is likely to fluctuate while these adjustments are being made.  These adjustments will be minimised if you provide a realistic estimate of your costs and complete your Annual Return earlier in the year.

How do I make an initial estimate if I am new to the scheme?
Costs covered by the scheme
Reporting your figures

HMRC view the HLC allowance as a service benefit and your tax code will be adjusted to allow for this. You may notice a line for service benefit on your personal tax code calculation from HMRC.

The benefit will be reported on form P11D at the end of the financial year and will need to be declared on your tax return. The amount of tax you pay back can be limited by the service benefit cap calculation, so it is important that you do this calculation.

Although some of the tax saved has to be paid back, it is worthwhile because:

  • The tax you have to pay back is restricted so you will still receive tax relief on at least the work related proportion of your cost
  • You and your funding body will save National Insurance on the whole amount
HLC and Your Tax Code