Are employer-paid relocation expenses tax-free in the UK?

Full answer

When an employee has to move house because of a new job, a job change with the same employer, or a significant change in their normal workplace, HMRC allows certain relocation costs to be paid or reimbursed by the employer completely free of income tax and National Insurance, provided the total qualifying costs stay within the exempt limit for that move. Qualifying costs typically include estate agent and legal fees on selling the old home and buying the new one, removal and storage costs for belongings, stamp duty on the new property, and reasonable travel and subsistence costs while relocating, including a period of temporary accommodation near the new workplace before the move is complete. To qualify for the exemption, the move generally has to meet several conditions: the employee's old home must not be within a reasonable daily travelling distance of the new workplace, the new home must be within a reasonable daily travelling distance, and the move must happen because of the change in employment or workplace, not for personal reasons unrelated to work. Costs paid above the exempt limit are not automatically forfeit tax relief for the excess -- any amount over the limit is treated as a taxable benefit in kind, reported on the employee's P11D (or payrolled), and subject to income tax and Class 1A employer National Insurance in the normal way. Some costs never qualify for the exemption at all, regardless of amount, including any element of increased mortgage interest, ordinary house-purchase price differences, or costs unrelated to the actual relocation itself, such as new furniture bought purely as a lifestyle upgrade rather than to replace items that could not be moved. Employers should keep clear records showing that the relocation was genuinely required by the job change, since HMRC can challenge claims where the link to employment is unclear.

Try the calculator

More answers

• What is Class 1A National Insurance and who pays it?
• What counts as a trivial benefit under HMRC rules in the UK?