Armed Forces Pay and Tax Guide UK 2026 — AFPS Pension, Tax-Free Allowances and Net Pay

How armed forces pay is taxed in the UK

Members of the British Armed Forces — Army, Royal Navy, Royal Air Force, and Royal Marines — are subject to standard UK income tax and National Insurance Contributions (NICs) on their basic pay and most allowances. There is no broad military pay tax exemption in the UK, unlike some other countries.

Pay is processed through the Joint Personnel Administration (JPA) system, with PAYE deducted at source by the Defence Business Services (DBS) on behalf of HMRC. Tax codes are administered through HMRC in the normal way.

For 2026/27, the standard income tax thresholds apply:

National Insurance is charged at 8% on earnings between £12,570 and £50,270, and 2% above £50,270 (2026/27 rates).

Armed Forces pay scales 2026

The Armed Forces Pay Review Body (AFPRB) recommends annual pay increases, which the government then accepts (fully or partially). For 2026, pay scales apply across all three services. The following are indicative annual salaries for selected ranks (inclusive of the X-Factor at 14.5%):

Other Ranks (OR)

Officers

These figures are approximate and vary based on seniority increment level. Pay is reviewed annually by the AFPRB.

Tax-free allowances for armed forces personnel

While basic pay is fully taxable, several allowances are paid tax-free:

Operational Allowance

Paid to personnel serving on designated qualifying operations (such as those in hostile fire zones or specific theatres designated by HM Treasury). The allowance compensates for the additional risks and hardship of operational deployment.

For 2026, the standard Operational Allowance rate is approximately £29.26 per day for qualifying operations. Over a 6-month operational tour (approximately 180 days), this equates to around £5,267 entirely tax-free.

HMRC confirms that Operational Allowance is exempt from income tax under s297 ITEPA 2003 for qualifying deployments.

Longer Separation Allowance (LSA)

LSA is paid when service personnel are separated from their family (or from their duty station) for extended continuous periods. It compensates for the personal burden of separation. Rates are tiered by length of separation and are paid tax-free.

LSA rates in 2026 (approximate):

Local Overseas Allowance (LOA)

When personnel are permanently stationed overseas, LOA compensates for the higher cost of living relative to the UK. LOA is set by the MOD quarterly based on exchange rates and local price indices. LOA is tax-free and varies significantly by posting location.

Examples of LOA rates for 2026:

Ration Allowance

Personnel who cannot access service rations (e.g. working at small detachments or on certain exercises) receive a ration allowance to cover meal costs. This is a tax-free reimbursement of actual costs.

Disturbance Allowance

When service personnel are required to move home due to a posting, Disturbance Allowance covers removal costs and related expenses. This is paid tax-free.

Council Tax Relief on Deployment

If you are deployed overseas on an operational tour, your Council Tax liability may be significantly reduced or waived:

• Personnel in Single Living Accommodation (SLA) on a UK base do not pay Council Tax — it is not charged on MOD-provided accommodation.
• Personnel on qualifying operational deployments can apply to their local authority for a Council Tax exemption or reduction under The Council Tax (Discounts) Regulations.
• Personnel in private rented or owned accommodation pay Council Tax normally, but can apply for a discount if their property is left empty during deployment.

AFPS 15 — The Armed Forces Pension Scheme 2015

All armed forces personnel joining from 1 April 2015 (and those who transitioned from AFPS 05 or AFPS 75 in April 2015) are members of the Armed Forces Pension Scheme 2015 (AFPS 15).

How AFPS 15 works

AFPS 15 is a Career Average Revalued Earnings (CARE) scheme:

• Each year you accrue 1/47th of your pensionable earnings for that year as a pension entitlement.
• Past years' accruals are revalued each April by the Consumer Prices Index (CPI) to protect their real value.
• The Normal Pension Age (NPA) is 60 (or your State Pension Age if later, whichever is lower) for most non-protected members.

Example: A Corporal earning £37,090 per year accrues £37,090 ÷ 47 = £789 per year of pension in that year. After 20 years at the same rank (ignoring revaluation), the accrued pension would be approximately £15,780 per year — plus revaluation uplifts.

Pension contribution rate

Service personnel contribute 9.44% of pensionable pay to AFPS 15. This contribution attracts full income tax relief under the pension input rules — meaning the actual cost is lower:

• Basic rate taxpayer (20%): effective contribution cost = 7.55% of pay
• Higher rate taxpayer (40%): effective contribution cost = 5.66% of pay

The MOD contributes approximately 26.5% of pensionable pay — one of the most generous employer contribution rates in any UK pension scheme.

Early Departure Payment (EDP)

If you leave the armed forces before Normal Pension Age but have completed a qualifying period of service (at least 2 years), you receive a preserved pension payable from age 60.

If you leave aged 40 or over with at least 20 years' reckonable service, you are entitled to an Early Departure Payment (EDP):

• An EDP lump sum equal to a multiple of your annual pension (typically 2.5x at the point of leaving)
• A reduced EDP pension that starts immediately and continues until you reach NPA, when it steps up to the full pension amount

Resettlement Grant

Personnel leaving the armed forces after certain qualifying periods receive a tax-free Resettlement Grant:

These figures are reviewed annually and are entirely tax-free.

Older pension schemes — AFPS 75 and AFPS 05

Some longer-serving personnel who were members of older schemes before April 2015 retain Protected Pension Age rights and accrued benefits under:

• AFPS 75 — a final salary scheme with a Normal Pension Age of 55 (for officers, 60 for some other ranks).
• AFPS 05 — a final salary scheme with a Normal Pension Age of 65, but with Enhanced Early Departure Payments from age 40/20 years.

If you are in a blended position (some service pre-2015, some post-2015), your pension will have two sections calculated under the respective scheme rules.

Tax planning considerations for service personnel

Marriage Allowance

If your spouse or civil partner earns below the Personal Allowance (£12,570), and you are a basic rate taxpayer, you can transfer £1,260 of their unused Personal Allowance to yourself — saving up to £252 per year. Apply via HMRC or your Self Assessment return.

ISA contributions

The annual ISA allowance is £20,000 (2026/27). Regular savers — including service personnel with modest outgoings in SLA — can build substantial ISA portfolios over a career. ISA growth and withdrawals are tax-free for life.

Self Assessment for multiple income sources

If you receive operational allowances, AFPS pension income, earnings from a second job, or income from renting out a property, you may need to file a Self Assessment tax return to ensure all income is correctly taxed. HMRC expects this if your total income exceeds £100,000 or if you have untaxed income above £1,000.

Transition to civilian employment

On leaving the armed forces, your P45 from DBS will be issued. Ensure your new employer uses your correct tax code — emergency codes (Month 1 basis) will result in overtaxation and require a refund claim via the P800 process.

Related calculators

The take-home pay calculator can help you model your net pay at any rank or income level.

The income tax calculator is useful for understanding how operational allowances interact with your total taxable income.

The pension calculator lets you model AFPS 15 accrual and project your pension income at retirement.