How does the GBP 8,000 relocation expenses tax exemption work?

Full answer

When an employer helps cover the cost of an employee relocating for work, the first GBP 8,000 of qualifying expenses and benefits is exempt from income tax and National Insurance. This is a long-standing fixed cap. The aim is to remove the tax sting from genuine job-related moves rather than to subsidise general living costs. To qualify, the employee must be changing their main residence because they are starting a new job with the employer, their existing job's duties have changed, or their normal workplace has moved. The new home must be within reasonable daily travelling distance of the new workplace, and the old home must not be. The costs must also be incurred (or the benefit provided) before the end of the tax year following the one in which the move takes place. Qualifying costs include things such as estate agent and legal fees on selling the old home and buying the new one, removal and storage, certain duplicate household items (white goods, furnishings), and travel and subsistence connected with the move. Mortgage interest subsidies and general bridging-loan support can also count within the rules. Costs that do not qualify - for example a mortgage redemption penalty, or compensation for a fall in property value - do not get the exemption and are taxable from the first pound. Worked example: an employer reimburses GBP 9,500 of qualifying relocation costs. The first GBP 8,000 is tax and NI free; the remaining GBP 1,500 is a taxable benefit. The employer can either report it via the P11D so the employee pays the tax through their code, or settle it through a PAYE Settlement Agreement so the employee receives it tax-free with the employer meeting the grossed-up tax and Class 1B NI. Note this exemption is separate from any Stamp Duty Land Tax due on the new home, which is the buyer's own liability - use a stamp duty calculator for that.

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