Relocation Packages and Tax — The £8,000 Exemption Explained for 2026/27
How the UK's qualifying relocation expenses exemption works, what's covered up to £8,000, and what becomes taxable above it in 2026/27.
The £8,000 Tax-Free Threshold
Employers can provide up to £8,000 of qualifying relocation expenses and benefits to an employee tax-free and free of National Insurance, covering a defined set of costs connected to a genuine work-related house move. This is a combined limit across all qualifying costs for a single move, not a per-category allowance, so legal fees, removal costs and new-home setup expenses are all counted together against the same £8,000 ceiling rather than each having their own separate allowance.
What Generally Qualifies
| Cost category | Typically within the qualifying exemption? |
|---|---|
| Estate agency and legal fees on selling the old home and buying the new one | Yes |
| Removal firm costs | Yes |
| Travel and subsistence costs directly connected to the move | Yes, within limits |
| Certain costs of connecting utilities or fitting new curtains/carpets at the new home | Yes, within limits |
| Compensation for a financial loss on selling the old home | Generally no |
| A subsidised or interest-free bridging loan beyond specified limits | Generally no, or only partially |
Because these categories are defined fairly specifically by HMRC, it's worth checking exactly what a proposed relocation package covers rather than assuming every cost associated with moving house for work automatically qualifies for the exemption.
The Move Has to Meet Qualifying Conditions
The exemption isn't available for any house move that happens to coincide with a new job — HMRC requires the move to be genuinely necessitated by starting a new employment, taking on new duties, or a change in the location of an existing job, and generally that the new home is a reasonable distance closer to the new workplace than the old home was. A move driven mainly by personal preference, timed to coincide with a job change but not genuinely necessitated by it, is unlikely to qualify.
What Happens Above the Threshold
Qualifying relocation costs beyond £8,000 don't lose the exemption on the first £8,000 — only the excess above that threshold becomes a taxable benefit in kind, reported on a P11D (or via payrolling of benefits, where the employer has registered to do so) and subject to Income Tax at your marginal rate plus Class 1A National Insurance paid by the employer on the taxable excess. For a substantial relocation package, particularly one including estate agency fees on an expensive property sale, it's fairly easy to exceed £8,000, so understanding the tax due on the excess matters when weighing up a relocation offer.
Checking a Relocation Offer
- Confirm which specific costs in the package fall within HMRC's qualifying categories
- Total the qualifying costs against the £8,000 combined threshold
- Ask how any excess above £8,000 will be taxed — via P11D or payrolled
- Check whether any non-qualifying items (such as loss-on-sale compensation) are taxed separately
Use the P11D benefit and take-home pay calculators below to estimate the tax due on a relocation package above the £8,000 exemption.
Frequently asked questions
How much can my employer pay towards relocation costs tax-free?
Qualifying relocation expenses and benefits up to £8,000 in total can be provided or reimbursed by an employer free of Income Tax and National Insurance, covering costs such as legal and estate agency fees, removal costs, some travel and subsistence, and certain costs of buying or setting up a new home, provided the move meets HMRC's qualifying conditions.
What happens to relocation costs above £8,000?
Any qualifying relocation expenses and benefits above the £8,000 threshold become taxable, generally reported on a P11D (or payrolled) as a benefit in kind, meaning Income Tax and Class 1A employer National Insurance apply to the excess in the normal way.
Does the exemption apply to any house move for a new job?
No — the move must meet specific qualifying conditions, generally that it's a genuine change of residence caused by starting a new job, changing duties, or a change in workplace location, and that the new home is a reasonable distance closer to the new workplace than the old home was. A simple discretionary house move unconnected to a genuine change in employment circumstances wouldn't qualify.
Are all relocation-related costs covered by the exemption, such as a bridging loan or mortgage interest subsidy?
Not necessarily — the exemption covers specific categories of qualifying costs set out by HMRC, and some support (such as compensation for a loss on selling the old home, or ongoing subsidised loans beyond certain limits) may fall outside the qualifying categories and be taxable separately, so it's worth checking the specific items in a relocation package against HMRC's qualifying list rather than assuming everything is covered.
Try the calculators
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